# Net Worth Calculator

## What is My Net Worth?

Net worth is defined as a person’s assets minus liabilities. The difference is called net worth.

The process to calculate your net worth is not hard. Simply add up the current value of everything you own. Then deduct your debts and everything else you owe. Or, enter the numbers below and let our net worth calculator do the math for you.

## Assets

Enter the current market value of your home and any other real estate you own.

Enter the current value of your car, truck, RV or other vehicles.

List cash and balances in your checking and savings accounts.

List the value of investments such as mutual funds in your brokerage account.

Include the total current value of all savings in retirement accounts.

Include collectibles, jewelry, savings bonds, annuities, and cash value of life insurance.

## Liabilities

List the balance you currently owe on mortgage loans and any home equity line of credit.

List the money you still owe on vehicle and auto loans (not monthly payments).

Add up how much you owe in credit card debt (payoff balances, not monthly payments).

Include the amount of student loans you owe using the current outstanding balance.

List the combined current balance owed on all personal loans, household loans, etc.

Enter the amount of unpaid taxes, medical bills and other liabilities.

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## What are Liabilities?

Assets are property — anything of value that you own.

Assets include financial property, such as bank accounts and mutual funds. Assets also include your residence, cars, trucks and other items. Technically, household goods and clothing are assets, but have little value.  So it’s best not to even include them in your assets.

Assets are not the same as your monthly or annual income. However, you can save or invest income and turn it into assets.

Liabilities are the same as debts.

A liability is the amount you owe on credit cards, loans, etc.  Include the total balance owed, not your monthly payment amount. Don’t forget to include obligations like unpaid taxes you owe.

Liabilities drag down net worth, so it’s a good idea to keep debts as low as possible. Remember, it is not how much you earn but how much you save that builds net worth.

## Does Net Worth Include My Business?

Yes. Business owners should include the value of their ownership interest in a business among assets. In other words, if you own an LLC, list the value of it as an asset. If you only own 50% of the company with a partner, then include half of the value.

The challenge is in valuing a business. If you are not sure of the value (and many owners are not), read: How to Value a Small Business. Or you could try a business valuation calculator.

## Why is My Net Worth Important?

Net worth is important because it is a way to measure your personal financial progress at a high level. How you choose to use your net worth calculation depends on your goals in life. Consider these four alternative goals:

• Get Financially Healthy – If your goal is to get your personal finances in good shape, then you want to see regular increases in your net worth. Calculate your net worth regularly – every other month is good.
• Attain Financial Freedom – If you have a goal to become debt-free, track the liability number to make sure it is headed toward zero. Being debt free means having no liabilities.
• Amass Wealth – If your goal is to become a millionaire, then your focus will be on achieving a 7-figure net worth. To get there you likely will have to invest in property that appreciates in value such as real estate, stocks or mutual funds.
• Prepare for Retirement – If you are in the retirement planning process, now is not the time to incur more obligations. Focus instead on increasing your retirement savings. At your age, target the kind of assets that can be converted to cash value easily.

Whatever your financial goals, knowing your net worth helps you stay on track. Related reading: Personal Wealth Management Tips.

## Why is Net Worth Important for Business Owners?

For entrepreneurs and business owners, net worth has added importance. Consider these three reasons:

• Buying a Franchise or Business. If you plan to buy a franchise or buy a business, your personal net worth is an important indicator of your ability to afford the investment. You may be asked to submit a personal net worth statement before the other side seriously considers your interest.
• Applying for a Business Loan. Lenders may use the owner’s net worth in business lending decisions. The lender uses net worth as one piece of information to assess creditworthiness and set loan terms. Related: business loan calculator.
• Succession and Exit Planning. Net worth can even be a measurement tool in the owner’s succession plan. Net worth can help you estimate and compare options for how long to keep working in the business and what it may take to grow your business value so you can cash out and exit.

## How is Net Worth Used in Buying a Francise?

Your net worth is important because the franchisor wants to make sure you have sufficient assets to be able to afford to buy a franchise. That’s why many franchises have a net worth requirement for a prospective franchisee.

There are well over 3,000 franchise brands, according to FranData. Each franchise sets its own net worth requirement. Typical ranges are \$100,000 up to \$1,500,000. But requirements can be higher or lower. For example, a Panera Bread franchise requires a whopping \$7,500,000 net worth. A Subway franchise requires as little as \$80,000 net worth in some circumstances.