You may read something like “CEO added $1.7 billion to Net Worth” in the news, but what exactly is someone’s net worth? Net worth is simply your own personal equity. The formula to calculate one’s personal wealth is total assets minus total liabilities, and it is shown below:
Where:
- Total Assets = the sum of tangible and intangible assets
- Total Liabilities = the sum of debts
The formula is a simple difference. One thing to note is that sometimes, if you have a lot of intangible assets such as copyrights or patents, you may want to calculate “tangible” net worth, which follows the same formula as above, but involves a net assets number, which simply means that you deduct intangible assets from your total assets.
Example
Suppose that you have $10,251 in cash, $325,612 invested, a $29,599 car, and a $550,599 house. You also have a credit card balance of $831, $17,291 remaining on an auto loan, $300,852 remaining on a mortgage. What is your current net worth?
First, we must sum up all the values of your assets, as shown below:
Next, we must sum up all the values of your liabilities, or debts, as shown below:
Lastly, we must subtract your total liabilities from your total assets, to get your net worth.
