There are several ways to measure your financial health. Your net worth can be an extremely useful tool in gauging your economic status and overall financial progress from year to year.

According to the Federal Reserve, as reported by intuit.com, the average family net worth by age group is:

 

Age Net Worth Goal
35 $76,200
35-44 $288,700
45-54 $727,500
55-64 $1,167,400

 

Understand these are general numbers not taking education and other factors into consideration. If you find yourself short of your age group's range, don't panic and dont'despair!

It is never too late to significantly increase your net worth situation, even in retirement if you follow sound money management principles.

Your net worth is essentially a grand total of all your assets minus your liabilities. In other words, your net worth is the figure you get when you add up everything you own from the value of your home to the cash in your bank account and then subtract from that the value of all of your debts which may include a mortgage, car or student loans, or even credit card balances.

If you're wondering what your net worth is, learn how to calculate and interpret it.

What Does Net Worth Tell You About Your Finances?

Theoretically, your net worth is the value in cash you would have if you were to sell everything you own and paid off all of your debts. In some cases, this number is actually negative, which indicates that you own more in liabilities than in assets.

While this is not an ideal situation, it is very common for people just out of college or starting their careers. In that case, your net worth is also a measure of how much debt you would still owe if you emptied your bank accounts and sold everything you own to put towards your debt. Though neither is a realistic scenario, what your net worth measures is more important than the (generally unrealistic) assumptions that are made to get to that number.

In fact, when it comes to your financial health, so to speak, there is no ubiquitous magic net worth number you should be striving for. But, you should use your net worth to track your progress from year to year and to hopefully see it improve and grow over time.

How to Calculate Your Net Worth

Calculating your net worth can be a simple process, but it requires that you gather all the information surrounding your current assets and liabilities. Most financial planners recommend that their clients keep a secure folder with information on all financial assets and liabilities to be updated at least once a year.

Gathering and organizing this information can be a bit of a chore at first, but ensures that you (and anyone else who might need it like your spouse or financial advisor) have access to the information when needed. Though such a folder can be turned into much more, calculating your net worth only requires basic financial information regarding the things you own and the debt that you owe. Here's how to get started:

Calculate Your Assets

  1. Start by listing your largest assets. For most people, this could include the value of their home, any real estate properties, or vehicles like personal cars or boats. In the case of a business owner, this list would also include the value of their business, which has its own more complicated calculation. Make sure you use accurate estimates of market values in current dollars.
  2. Next, you'll want to gather your latest statements for your more liquid assets. These assets include checking and savings accounts, cash, CDs or other investments such as brokerage accounts or retirement accounts.
  1. Finally, consider listing other personal items that may be of value. These could include valuable jewelry, coin collections, musical instruments, heirlooms, a rare wine collection, etc. You don't need to itemize everything, but you can try to list items that are worth $500 or more.
  2. Now, take all of the assets you have listed in the first three steps and add them together. This number represents your total assets.

Calculate Your Liabilities

  1. Again, start with themajor outstanding liabilities such as the balance on your mortgage or car loans. List these loans and their most current balances.
  2. Next, list all of your personal liabilities such as any balance on your credit cards, student loans, or any other debt you may owe.
  3. Now, add up the balances on all of the liabilities you listed above. This number represents your total liabilities.

Calculate Your Net Worth

  1. To calculate your net worth, simply subtract the total liabilities from the total assets. For this exercise, it doesn't matter how big or how small the number. It doesn't necessarily matter if the number is negative. Your net worth is just a starting point to have something to compare against in the future.
  2. Repeat this process at least once a year and compare it with the previous year's number. By comparing the two, you can then determine if you are making progress or getting further behind on your goals. You may want to recalculate your net worth more often if you've embarked on an aggressive savings or debt repayment plan.

More Net Worth Tips:

  • Be conservative with estimates, especially with home and vehicle values. Inflating the value of large assets may look good on paper, but may not paint an accurate picture of your net worth. 
  • Keep liquid savings in high-yield accounts, which can help them grow faster if you're earning a competitive annual percentage yield.
  • Make debt repayment a priority and consider refinancing or consolidating debts at a lower interest rate to help speed up your debt payoff.
  • Review yourbudget to look for areas where you can reduce expenses and allocate more money to either savings or debt repayment. If you have additional money to save, consider maxing out your emergency fund , then maxing out your annual contributions to an individual retirement account.

At Nugent & Associates, we're not just number crunchers. We bring over 3 decades of invaluable certified public accounting and tax expertise to your company – serving as business and financial strategists who can offer such services as tax and financial planning, investment advice, diligent financial records, and help with estate planning.

Even better, we will give you time to focus on what you do best: running the day-to-day operations that drive your business toward success.

Take advantage of our FREE and no obligation business checkup.

We will visit you at your business at a time and day convenient for you, analyze your numbers, discuss your goals and concerns and report back with a complimentary detailed written analysis to help your business succeed!

At Nugent & Associates, we're not just number crunchers. Our people bring decades of invaluable certified public accounting and financial and tax expertise to you – offering tax and financial strategies to individuals such as yourself. If you have any questions or concerns about your own tax, financial or investment matters, please do not hesitate to contact us.

Experienced tax and financial experts are not just for the super rich. At a reasonable fee you too can maximize your wealth and receive professional guidance for retirement, and/or any tax issues you may be facing, no matter your situation, with a tax and financial expert as your consultant.

Contact Nugent & Associates today. We don't charge for phone calls. You may just find you found an ally in your quest to have a great financial future.

After all, at Nugent & Associates, we succeed when you succeed!


Disclaimer:

PLEASE READ THE FULL TERMS AND CONDITIONS OF THIS WEBSITE BEFORE USING THIS WEBSITE.

This page is intended to be informational. This website, nor any of the information contained on this site constitutes professional, business, tax or legal advice and is not a substitute for such advice nor does it create a professional-client relationship between you and Nugent & Associates.

State and federal laws change frequently, and the information in this page may not reflect your own state’s laws or the most recent changes to the law.

The information contained within this website should not be considered as a solicitation or an offer for a professional-client relationship. Materials contained in this website are of a general nature and should not be substituted for professional advice. Nugent & Associates is providing this website and the information contained herein only as a convenience to you. Nugent & Associates assumes no liability or responsibility for any errors or omissions contained within this website. There is no guarantee that the information included on this site is current, accurate, complete, useful, or reliable.

Tax Planning & Preparation

We assist our clients in individual and business tax planning throughout the year.

Nugent & Associates provides:
  • Year-Round analysis to ensure a smooth and predictable year-end close.
  • Assist in establishing retirement planning.
  • Performs in-depth review of all deductions available.

Monthly/Quarterly
Financial Statements


Nugent & Associates offers outstanding accounting services and acts as a quasi-controller for companies who do not employ their own full-time accountants.

This allows our clients with more time to focus on new services, new customers and other core business issues.

Business Planning, Budgeting
& Growth Strategies


Nugent & Associates assists it clients with:
  • Starting a new venture, product or service
  • Expanding a current organization, product or service
  • Buying a new business, product or service
  • Turning around a declining business

QuickBooks Training
& Support Services


As Certified QuickBooks Professional Advisors, we can be of assistance with QuickBooks accounting or payroll and help increase your productivity and efficiency.