Q: How do I calculate my net worth?

A: A person's net worth is the amount by which their assets exceed their liabilities. You can determine your net worth by creating a personal balance sheet -- list all of your assets on one side, and your debts on the other. The resale or replacement value of your assets should be used, and generally, "personal property" such as clothes, electronics, etc., are not considered when determining net worth.

An individual's personal balance sheet may look something like this, in simplified form: On the assets side, they might have their home ($225,000); their car (replacement value of $7,500); $25,000 in their 401(k); $6,000 in other investment accounts; $2,500 in their checking account; and $5,000 in savings. The total value of their assets would therefore be $271,000. On the liabilities side, they might have $210,000 in mortgage debt; $6,000 left on their car loan; $12,000 in student loans; and $9,800 in credit card debt. Total liabilities would therefore be $237,800. To find net worth, you simply subtract the liabilities from the assets, so in this case, the person's net worth would be $33,200 ($271,000 - $237,800 = $33,200).

It is possible, unfortunately, to have negative net worth. You could own a home with a market value of $200,000 that you still owe $210,000 on, because you bought when the market was hot. It is quite common for people to owe more on their cars than the cars are worth in replacement value. And of course, it is very common for people to have credit card and other personal finance debts that outweigh their savings and investments. People with negative net worth are good candidates for credit counseling services.

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