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Net worth represents the total value of an individual's or a company's assets minus their liabilities. Simply put, it is the difference between what they own and what they owe.
A net worth calculator is a tool designed to determine this value based on key inputs, such as total assets and liabilities. An advanced net worth calculator can even categorise inputs, allowing users to specify different asset types—like shares, property, gold, cash, and bank balances—or liabilities, such as home loans, personal loans, credit card dues, and taxes owed.
Net worth can be determined for any company, group, or individual using a straightforward formula. Every entity possesses resources that either generate financial benefits or create liabilities.
Simply put, net worth is the difference between total assets and total liabilities. The formula for calculating it is explained below in detail.
Thus, one can determine an individual or company's net worth by separately summarising all assets and liabilities and then finding the difference.
Assets owned by a person are:
Liabilities of the person:
Net Worth Calculation
Using the formula:
Net Worth = (Total Assets) − (Total Liabilities)
= (3,00,000+5,00,000+60,00,000+4,00,000) − (25,00,000+50,000+5,00,000)
= 72,00,000 − 30,50,000
= Rs 41,50,000
Thus, as of today, the total Net Worth of the person is Rs 41,50,000.
A net worth calculator is a valuable tool for assessing financial health. Here are some key benefits it offers:
A net worth calculator is a powerful tool with numerous benefits. It provides valuable insights into your financial status while guiding you toward smarter decisions to improve and grow your wealth.
In summary, a Net Worth calculator is valuable for managing finances efficiently. However, accounting for all assets and liabilities is essential for an accurate calculation. Tracking your Net Worth can help you stay on course and achieve your financial goals.
Net worth is calculated using a straightforward formula that takes into account the total value of an individual's or company's assets and liabilities.
Net Worth Formula:
Net Worth = (Asset 1 + Asset 2 + ... + Asset N) – (Liability 1 + Liability 2 + ... + Liability N)
Let's break it down:
By adding up all assets and subtracting the total liabilities, you arrive at the net worth figure.
When calculating net worth, assets are defined as anything an individual owns that has monetary value, including cash, investments, real estate, and personal property. Essentially, it's anything you could potentially sell for cash.
Here's a more detailed breakdown of what counts as an asset:
A liability is a financial obligation or debt that a person, organisation, or business owes to another party. It represents a claim against an entity's assets and is typically settled through the transfer of economic benefits like money, goods, or services.
Liabilities are of two types:
Some examples of liabilities include:
It's recommended to calculate your net worth at least once a year, or more frequently if you're making significant financial changes, such as buying a house or a car.
Tracking your net worth regularly helps you:
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