How to calculate your net worth

Published Thu 30 Jul 2020

There are many ways of measuring your financial health. Credit scores, savings milestones and investment portfolios all work together to complete a portrait of your financial aptitude. 

But there’s another factor you should consider: your net worth.

Your net worth represents the relationship between the decisions you make regarding your assets and those that affect your liabilities (debts). 

As the ways in which you direct your money change, so does this relationship. Learning how to calculate your net worth can help you understand where you stand, and keep you on track for a better financial future.

What is net worth?

Net worth is simply a personal balance sheet; the difference found by subtracting your liabilities from your assets. 

In other words, what you own, minus what you owe.

In the latest data from the Office for National Statistics (ONS) published in June 2020, the median net worth for UK households between April 2016 and March 2018 was £356,400.

Each step you make in your own financial journey should aim to, ultimately, increase your assets and decrease your liabilities. Tracking your net worth can assist you in attaining this goal by helping you keep an eye on where your money is going.

“Tracking it gives you a good measure of whether you’re headed in the right direction with a growing net worth,” says Crystal Rau, CFP, MBA, and founder of Beyond Balanced Financial.

Working out net worth

To calculate your assets and liabilities to find your net worth total, you will need to be prepared to do some research. More importantly, you’ll have to be honest with yourself about where your money goes.

How to calculate net worth

First, look at your assets. Your property, savings accounts, current accounts, ISAs, and any shares and bonds should all be included.

Does net worth include pension?

Even though you can’t access your pension until you retire, it is included in your net worth. With many of us moving jobs regularly, this can mean you have built up a number of small pension pots, rather than one large one. 

Fortunately, help is at hand from the Government’s Pension Tracing Service to track down any missing pensions so you can add them to the list.

When you calculate the sum of your assets, it’s important to not only consider the obvious items. Think about your less apparent belongings, too. Many people, according to Rau, often forget to include items like “cars, household furnishings, collectibles, and the cash value amount for life insurance policies.”

You can use online resources such as Zoopla, to get an idea of what your property is now worth, Autotrader for your car and eBay for your possessions can be used to determine an estimate for the value of your furniture, jewellery and other household items.

Next, calculate your liabilities. And that means everything. It is important to gather your total debt, from your mortgage to any credit card debt, student loans, car loans and personal loans. Don’t forget to also account for any accrued interest. 

Once you have totalled all of your assets and your liabilities, that is your current net worth! 

Net worth calculator

Alternatively, you can enter your numbers into a tool such as the Bankrate net worth calculator, which also provides an estimate for what your net worth could look like over the next decade.

How to use your net worth

Use your new knowledge as a tool in your financial arsenal. 

While credit scores and savings give insight into parts of your overall outlook, your net worth tells the full story of everything you put your money toward.

“A growing net worth is a sign that you are making smart financial decisions,” Rau says. “Decisions like saving a portion of your wages, growing your investments or paying down debt are all going to improve your net worth. On the flip side, growing credit card debt, depreciating assets and spending more than you earn will drag your net worth down.”

If your assets and liabilities don’t quite paint the picture you expected, knowing the details can help you determine a plan of action for your spending and budgeting

Use your net worth total as an incentive to do better. If you find your total is on track with your goals, maintain your habits or look for ways to further grow your net worth.

Benefits of tracking your net worth

The value in knowing your net worth doesn’t end there. Best practices indicate you should track it regularly to maintain financial health.

According to Rau, you should be checking your net worth often. “I would recommend checking your net worth every month around the same time so you get a good idea as to how it fluctuates depending on your cash flow. 

Once you get the hang of tracking it, it’s a good idea to keep tabs on it quarterly or every six months.”

Net worth fluctuates over time

Generally, your net worth will start off quite low under the age of 35, and then steadily grow in your 40s. Hopefully, once you hit your 50s, your net worth will begin a sharp ascent that ends with a comfortable retirement.

There will, however, be fluctuations along the way. Your net worth will ebb and flow as you take on a mortgage, build credit and find your priorities changing. 

Your net worth will almost certainly take a dip if you decide to have children, but then it will hopefully recover as they grow up!


27 January 2021