How to Quickly Calculate Your Wealth

With inflation raging over 8%, it is all about wealth protection and cash flow growth. While we share our Net Worth monthly, I still get the impression that most people do not know what Net Worth is.

This post explains how TNFG calculates our net worth and what you can do to calculate yours.

Table of Contents

Wealth over Checking

Your net worth is the sum of all your assets minus the sum of the debts you owe. Everything that you own that you can sell for real value and everything that you need to pay back.

Tracking your net worth is one of the most important things you can do financially. This can help you see if you are making progress month-to-month and year-to-year. The truth keeping up with the Jones (i.e. Average Household)

The formula for wealth is simple (see below).

Assets – Liabilities = Net Worth

If your assets are greater than your liabilities, you have a positive cash flow and positive net worth. Quickest way to figure that out is to use find tech like Mint.com and Personal Capital.

If your debts are greater than income (assets), your net worth will be negative. Depending on your time horizon or risk capacity, you might need to address your debt. Postmark it with a check made payable to your future happiness. If you are younger, there is likely space for planning. Beyond tackling high interest debt like credit cards, you might be better off prioritizing long term investing.

The goal is to figure out either paying down debt and/or increasing your assets. This is what builds your wealth.

Asset Categories that Boost Your Wealth:

Cash. This is literal cash on hand or highly liquid assets such as bank checking accounts, savings accounts, Certificate of Deposit etc.
Stocks. This is investments in equities that are not in retirement accounts.
Bonds. This is investments in bonds that are not in retirement accounts.
Annuities. The value of your pensions.
Retirement. This is any retirement accounts–401(k), 403(b), 457(b), Traditional/Roth IRAs, Health Savings Accounts etc.
Home. The value (equity) in your primary residence.
Personal Property and other Real Estate (RE). The value of our other real estate investments (rentals, notes, flips, etc.)
Cars. Vehicle(s) value(s).
Other. The cash value of life insurance policy for example.

Liability Categories that Decrease Your Wealth:

Home Mortgage and other RE Mortgages. The mortgage on your primary residence.
Student Loans debt. This one should be self-explanatory.
Credit Card. The current balance on all your credit cards.
Car Loans. Vehicle loan(s).
Other. Other liabilities.