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Calculating Your Net Worth: A Step-By-Step Guide

It is one of the most freeing things you will ever do. It can be difficult, but it is worth it in the end. You will change your life for the better if you get there. You can create the life you have always wanted with a lot of hard work, dedication and patience.

You will need to calculate your net worth when you are pursuing financial freedom. Keeping track of your progress towards financial freedom requires you to periodically review your net worth. Your net worth is a number that tells you how far along you are in your financial journey. Tracking your progress, motivating you to stay the course, and influencing your decisions can all be done with it.

How Do I Calculate My Net Worth?

Your net worth is the total of your assets and liabilities. It’s a measure of your financial health and should be monitored regularly. You can use paper, spreadsheet, or app to calculate your net worth. There is also a net worth calculator that can help you as well:

All of your assets should be written down if you are going the paper route. A fire-proof safe or lock box is a good place to keep the paper copy of your list. Take into account retirement accounts, savings, and any cash you have in your apartment. Investments and other assets that are not easy to access are still valuable. Add them up. All of your debts should be written down. This category includes credit card debt, student loan, car loan, and personal loans. Add these to your assets. To add up your total liabilities, be sure to keep track of your debts and expenses, as well as your financial obligations. You should subtract your liabilities from your assets once you have your sums. You have your net worth. You can work towards your financial goals now that you have an idea of where you stand financially.

I personally prefer the spreadsheet method. I make a column for my assets and liabilities. I can easily keep track of my net worth. I use a formula that keeps me from making mistakes in my math. I can be sure that my calculations are accurate because the formula I use is very reliable. I subtract my liabilities from my assets to see my net worth. I update this sheet when I pay off my loans. It’s great to see my debt go down.

You can use a personal finance app to track your net worth. If you use a personal finance app, you can stay on top of your finances and make sure that your net worth is always growing. This is an easy way. It’s a great way to start. All your banking information is plugged in, including your checking account, savings account, and credit card logins. You can use the service to manage your finances once you have entered all your banking information. Your net worth is kept up-to-date by the app. You can use this data to make smart financial decisions that will set you up for success in the future. Apps like Mint and The Motley Fool, here is the median net worth according to age brackets based on research from 2019.

Median net worth by age (2019)

Under 35 $14,000
35-44 $91,110
45-54 $168,800
55-64 $213,150
65-74 $266,070
75 or older $254,900

Source: The Motley Fool

These numbers may feel shocking if you just started working on financial independence. Achieving financial independence requires time and dedication. When you can barely make minimum payments on your credit card or student loan debt, it’s hard to imagine more than $100,000 sitting in your bank account. If you have enough money, you can get out of debt and live a life free of financial stress.

Allow the numbers to encourage you. Take a deep breath and remember that you have the ability to achieve your goals, no matter how difficult they may seem. You can too because other people your age have amassed wealth. You can achieve financial success with dedication and focus.

How to Increase Your Net Worth 

If you don’t want your net worth to be what you want it to be, you need a plan to increase it. Track your spending so you can see where your money is going and make changes to maximize your savings.

Pay Off Your Debt

One of the fastest ways to increase your net worth is to pay off any debt. Pick which debt to tackle first and list out all of your debts. Make sure to create a budget that will allow you to pay off the debt in a timely manner once you have listed all of your debts. You should list your credit card debt, car loan, and student loan. You should include any outstanding debts such as medical bills, personal loans, and home loans. I like MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE MzE This approach helps me keep track of my progress in reducing my debt. This method is called the debt snowball.

It is possible to pay off the debt with the highest interest rate and then move to the next highest interest rate. Once all of the debts are paid off with this method, you can begin to save money and build your credit score. This is called the debt avalanche method.

You can get debt-free with either method. You should decide which method is best for your finances. Staying committed to paying the debt off and not accruing new debt is what they rely on.

I remember that the money I put toward my debt is increasing my net worth when I struggle to stay motivated. Each step I take toward financial freedom is worth the effort, no matter how small.

Start Investing Your Money

Investing will allow you to earn more money on top of your net worth increase. It is important to remember that with investing, there is always risk involved so it is important to do your research and understand the investment before getting involved. You don’t have to have a lot of money to invest. As you gain confidence and knowledge, you can start small. Over time, even $100 a month can make a huge difference. If you contribute the same amount each month, your savings will grow.

I always recommend investing in a work-sponsored retirement account first and then a brokerage account second. You can use retirement accounts to earn more. You should maximize your own contributions and be aware of the limits associated with different types of retirement accounts so that you can make the most of them.

Start a Side Hustle 

If you need extra money to pay off debt or invest, starting a side hustle can bring in a couple hundred every month to help meet those goals. You can create a side hustle from almost anything. You can turn a side hustle into a full-time job with the right attitude and work ethic. You probably can if you think you can make money from it. Take the necessary steps to make it happen, and do your research.

Side hustles give you extra money to put toward your goals. Side hustles can provide a great learning experience. You can put the money toward increasing your net worth if you don’t rely on it to pay your bills. If you put a hundred or so dollars a month toward your net worth, it will make a huge difference over time.

The Bottom Line 

Financial freedom can be achieved with your net worth. It can be used as a tracking measure to make sure that you are on the right path. Tracking your net worth will show you how committed you are to your finances.

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