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​Do You Know Your Net Worth? 

At the start of every month I do a review of our finances. I balance the budget, closing off the past month, and opening a new month. And then I do a net worth statement.

Knowing our net worth shows us exactly where we are in our financial plan. It shows us the value of what we own if we converted all assets into cash, and the value of what we owe - the debt we carry. In other words it's a balance sheet for our personal finances. 

We can see at a glance whether our wealth has increased or decreased, and it shows us where those changes occurred.

It's not at all complicated, and if you really want to be debt free, cashed up and laughing, then you need to know your net worth. Then you can use it to plan your progress towards your financial goals. 

While it may sound complicated, it's not really. It's simply a list of assets (those things you own) and liabilities (debts you owe). You'll get your net worth when you deduct the total of what you owe from the total of your assets (and hopefully it will be a positive and not a negative figure).

What are Assets?
There are two types of assets: appreciating and depreciating assets.

Appreciating assets include things like property you own, investments such as shares or businesses, superannuation accounts, savings and cash - items that increase in value over time.

Depreciating assets are things like cars, boats, furniture, electronics - items that sell for less than what you paid for them.

What are Liabilities?
Liabilities are debts you owe: mortgages, car loans, personal loans, loans from family, credit card debt, HECS/HELP debt,  and how much they would all be worth if you liquidated and sold them all today. Your liabilities are debts such as car loans, mortgages, credit card debt or student loan.

How to Calculate Your Net Worth
Get a sheet of paper, or open a spreadsheet on your computer. 

Under the heading "Assets" list all your assets and their current value:
The value of your home ( Check recent sales in your area or listings on realestate.com.au to get an idea, then for example, if your home is worth $500,000 and you have a $300,000 mortgage, list it as $500,000 under assets).
The value of your car if you sold it today. You can check this on redbook.com.au and similar sites.
The value of any savings/term deposits you own (use the actual cash figures for this amount - log in to your online banking to get the current balances).
The value of shares you own.
The total of your superannuation.
The value of any business or other investments you have.
The value of any money you are owed (have you lent money to family/friends? List the balance owing here).
The value of any depreciating assets (clothes, furniture, cars, boats, motorbikes, tools, electronics etc. at current market value i.e. the amount you'd get if you were to sell them today).

Add the value of all your assets together to get a total. 

Under the heading "Liabilities" list all your debts. Scary though it may be, it pays to be honest here. There's no point in fudging the figures just to make your net worth look good on paper, when you know it's different.

List:
The amount owing on your mortgage.
The amount owing on any home equity loans.
The amount owing on any car loans.
Child support.
Outstanding council rates.
School fees.
HECS/HELP debt.
Contracts/subscriptions for gym memberships. 
Outstanding balances on telecommunication contracts.
Any other money you owe.

Add the value of all your liabilities to get a total.

Subtract the total liabilities from the total assets and you have your net worth.

Your net worth statement is a picture of your financial condition today. It doesn't lie.

If the total is positive, then you are succeeding in living within your means and staying out of debt. You are building assets and have a positive net worth.

If the total is negative, then you are spending too much, living beyond your means and have relied on credit to bridge the gap in your finances, getting deeper into debt.

A negative net worth, while it may seem depressing, doesn't have to stay that way. Focus on paying down those debts and increasing your net worth. Think of this: every dollar you pay off debt decreases your liabilities and increases your assets; in other words reducing your debt increases your net worth dollar for dollar - a very easy way to change that financial picture for the positive.

It takes work and dedication to become debt free, but it is worth the effort. And seeing your net worth increase every month will boost your determination to reach your financial goals.
Related Articles
A Quick and Effective Plan for Reducing Debt
6 Simple Steps to Financial Stability
7 Ways to Spend the Rest of Your Life 
Debt-Free

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  • Home
  • Join the Club!
    • Twenty Reasons to Join the Cheapskates Club
    • Gift Memberships
  • About Us
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    • Ask Cath
    • Glossary of Cheapskating Terms
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  • Inspiration
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    • Handmade Christmas Central >
      • Handmade Christmas 2025 is about to start
    • 31 Days of MOO Index
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      • Back to Basics
      • Back to Basics Index
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    • Add a Recipe
    • $300 a Month Food Challenge >
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