How are you doing?
“Well,” I hope, but my question today was specifically about your finances—how do you measure up? What is your net worth?
Bill Gates III* has the highest net worth in the world—his financial worth is $1 billion for every year of his life…that’s $50 billion. He is closely followed by Warren Buffett at $42 billion.
Looking at the median US household net worth,** the highest percentage of households (30.6%) falls under $25,000 with 2.7% having a net worth of over $1,000,000. So how do you compare?
Your net worth is the value of all assets minus the total of all liabilities. Why is it important to know what your net worth is? Basically, it’s a way of measuring and tracking your financial wealth—it’s also an excellent indicator of your financial position.
Assets:
- Value of your home/additional property
- Vehicles: See Kelley Blue Book for current day value
- Cash: Savings accounts/CDs/Money Markets
- Retirement accounts: 401k/IRAs/SEPs
- Stocks and bonds
- Variable annuities
- Personal effects: Jewelry/art/collectibles/coin collections/musical instruments
Liabilities:
- Mortgage(s)
- HELOC
- Student loan(s)
- Credit card debt
- Vehicle loan(s)
- Personal Loan(s)
To determine what is owned minus what is owed, add up your assets and subtract your liabilities to come up with your net worth. Try to be conservative in your estimates; you can also use online tools for increased accuracy. Do this periodically to monitor your financial well-being and to reach goals. Make sure you are including all your assets and liabilities each time to give an accurate result. It’s best to repeat this process once a year to gauge your economic situation.
Once you have a number, bear in mind that it really doesn’t matter how big or small it is, or even if it’s negative. By calculating this figure, you have made the first step in becoming aware of your financial situation. Yes, it would be nice to be as wealthy as Bill Gates or Warren Buffett, but this is really a personal exercise and not meant to serve as a comparison with billionaires, celebrities, or even your drinking buddy. Merely use these people as inspiration to set financial goals and increase your estate.
Often, people are considered wealthy by others because they own a large house, drive a luxury car, and wear designer clothes—but in fact, this person may have a lower net worth than a homeless person if their debt is high.
Breakdown of households by net worth (CNN Money)
Check out my previous articles to see how to increase your financial skills in order to increase your net worth and achieve financial stability and success.
*Forbes.com “The World’s Richest People”
**Claritas December 2003
About the Author: Linda Hicks
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