How Do I Know My Net Worth?

To begin with, if you want to improve any situation in your life you need to know where you stand today.  This is the case with your finances and it all begins with knowing your net worth!

What Is My Net Worth?

I asked myself this question 4 years ago and I cringed when I saw that I was looking at a -$58,327 net worth.  That’s right, I had a negative net worth and was almost $60K in the hole!  How is that possible?  I thought that my family was doing fairly well.  I had just left the military not too long ago, had a household income of roughly $122K, and just bought a house for $340,000.  This all sounds great until you really start looking at the numbers behind the scene.  I was living a typical American lifestyle and didn’t think anything was wrong because this is how everyone lives, right?  I began to take a deeper look into my finances and wrote a detailed list of everything.  This included the money that I had in bank accounts (sadly, this was not a lot), any kind of property that I owned, and any outstanding loans that were in my name.  So let’s take a deeper look…

  • House: Purchased for $340,000 but we owed $352,000 because we used our VA loan and put 0% down.  Sadly, we even rolled the closing costs into the loan, so now we are upside down…this means that you owe more money than the house is worth.
  • Vehicle 1: We are $5,000 upside down on this vehicle because we took out a 6 year loan to keep the monthly payments down and the value of the vehicle depreciated faster than our payments paid down the loan. Obviously, we didn’t put any money down when we purchased this vehicle.  We owed $27,000.
  • Vehicle 2: We are $7,000 upside down due to the same reason as vehicle 1 but we also rolled the negative equity from our trade-in into the loan on this vehicle.  Typical thing for people to do in todays car market. We owed $32,000.
  • Credit Card 1: This card had a $24,000 credit limit and we wound up having $22K in debt on this card.
  • Credit Card 2: Had a $14,000 limit and owed $12,000 on this card.

Grand Total Debt: roughly $450,000    Total Net Worth: roughly -$58,000

Now that I look back and see these numbers on paper, it is hard to understand what I was doing!  These financial numbers happen when you simply don’t pay attention to where your money is going.  I never thought I would have $34,000 in credit card debt but the debt just kept piling up every day, a little at a time.  We moved 2 times in 1 year.  Once from Alaska to the east coast and, the other time, only 30 miles down the road.  But, we put the cost of those moves on our credit car.  Going out to eat?  Put it on the credit card.  Putting gas in the car?  Put it on the credit card.  Special occasion?  Put it on the credit card.  Next thing we know, we look up and have $34,000 in credit card debt.  This all stopped once I had the information on paper and it was staring me in the face, which is why it is SO IMPORTANT for you to write everything down and to calculate your net worth.  Once you have that number, you can figure out what you need to do to stop the bleeding and improve your financial situation.

So How Do I Calculate My Net Worth?

Calculating your net worth is very easy.  Once you have everything down on paper, all you have to do it this simple math formula:

Assets-Liabilities=Net Worth


In simpler terms, it is: What you own-What you owe=Net Worth.

Now, go figure out your net worth.  It’s an important step in beginning your journey to financial independance and Freedom!

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