Net worth is considered by many financial experts as the ultimate number that you need to track regarding personal finances. Net worth is the total $$$ remaining if you sold/liquidated everything you own and paid off all of your debts. Tracking your net worth over time will put you on the road to financial independence or retirement… Or, maybe not!
How do you calculate your net worth?
To calculate net worth, add up the value of every single one of your assets. That would include the value of your home(s), your cars, all checking and savings accounts, brokerage accounts, retirement accounts, your business, and everything else that could be liquidated. When it comes to valuing your business, you should have a detailed, logical method for justifying that valuation, just as you would when justifying the value of your home – i.e. comparables, recent sales, appraisales.
Next, subtract the sum of all of your debts. This would include all real estate mortgages, credit card debts, notes payable (personal), loans, as well as all other personal obligations and liabilities.
The resulting total is your net worth. With that net worth in hand, examine the graph below and compare yourself against other American households as depicted on the accompanying graph. (Editorial note: Nothing lends itself more towards creating and updating your personal net worth on a periodic basis than an Excel Spreadsheet. Keep it on your desktop and revise as needed.)
Other notes regarding net worth…*
Note that the top 1% represents roughly 1,259,817 households in the U.S.
What about the top .1% (one tenth of one percent) in terms of net worth? There are approximately 125,981 households in the U.S. that would fall or qualify for the top one-tenth of one percent (.1%) in terms of net worth, and they would have a net worth of at least $43,090,281 or greater.
* Data extracted from an article by DQYDJ (Don’t Quit Your Day Job) at www.dqydj.com
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