It’s always interesting, and helpful, to figure what your net worth is – especially if you just got married. Before you got married, your net worth was just about you. Now, it’s the combination of your net worth and your spouse’s net worth.
Calculating your net worth is actually very simple. Basically, you list the value of your assets, then list the value of your debts and liabilities, then subtract the liabilities from the assets.
The challenging part about calculating your net worth is determining what your actual assets are, and what their real values are. A lot of people want to count every single thing they own as an asset. The truth is, it’s actually a better approach to only count your large assets, like your home and automobiles, and not your smaller assets, like your kitchen table and cell phone.
It’s also good not to over-estimate the value of your assets. It might make your net worth look better, but it doesn’t really give you the true picture of your net worth.
Here are the seven simple steps to determine your net worth. Don’t forget – since you recently got married, include all your assets/liabilities and your spouse’s assets/liabilities.
1. List all your physical assets worth at least $1,000.
Be sure and use real estimates of what the items could actually sell for. Examples include:
- Automobiles and motorcycles
- RV vehicles
2. Next, list the values of all your liquid assets.
This includes checking and savings accounts, 401K accounts, stocks, bonds, CDs, cash accounts, IRAs, and any other money-based assets.
3. Add up the value of all your assets.
This will give you the amount of your total assets.
4. Create a list of all your liabilities.
Now that you have your total assets, you need to calculate your total liabilities. Start with your largest debt related directly to the largest value items you own – like your home mortgage and your auto loans. Next, add up all your other debts, such as credit cards, student loans, medical bills, and any other debt.
5. Add up all your liabilities.
Add up all your debt from step 4 to determine your total liabilities.
6. Last (and hopefully not least!) subtract your total liabilities from your total assets.
If you have more assets than liabilities, you’ve got a positive net worth. If you have more liabilities than assets, you’ve got a negative net worth.
The good news is, since you’re newly married, your net worth has a great opportunity to grow over the years. You can reduce your debt, see the value of your home rise, invest in stocks, 401Ks and savings plans, and make other investments. That’s why it makes good financial sense to determine your net worth once a year, and see if it’s growing or shrinking. It will help give you the big picture for financial planning, and encourage you to move in the right direction.