Net Worth Calculator

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:

• Assets: These are income-generating or financially beneficial resources—such as owned property, rental income, shares, or savings.
• Liabilities: These represent financial obligations or outflows, including loans, taxes, fees, and other expenses.

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:

• Cash: Money in checking and savings accounts, as well as cash on hand.
• Investments: Stocks, bonds, mutual funds, and other investment vehicles.
• Real Estate: Property ownership, such as homes, land, and rental properties.
• Personal Property: Vehicles, jewelry, art, and collectibles.
• Financial Assets: Claims on someone else's money or property, like loans you've made to others.

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:

• Current liabilities: Obligations that are due within one year (or the operating cycle, if longer). Examples include accounts payable, accrued expenses, and short-term debt.
• Non-current liabilities: Obligations due in more than one year. Examples include long-term debt, deferred revenue, and lease obligations.
• Contingent Liabilities: Potential obligations that may arise if a future event occurs or doesn't occur.

Some examples of liabilities include:

• Loans from banks or other lenders
• Accounts payable to suppliers
• Salaries payable to employees
• Taxes owed to the government
• Deferred revenue
• Bonds and mortgages
• Warranties
• Accrued expenses like utilities or interest

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:

• Understand your financial progress
• Identify areas for improvement
• Make informed decisions about your finances