Net Worth Calculator

The primary goal of most investors is to establish a nest egg, or significant net worth.  Net Worth is defined as your assets minus your liabilities.  If you are just starting out on your financial journey, there is a strong possibility that your net worth is negative, and that’s okay.  Our current economic system is built on debt.  The economic reality is that the large majority of businesses start in debt, and most private investors start out with debt.  The goal is to gradually get out of debt (a negative net worth) and begin to build real wealth.

As we stated, net worth is defined as your assets minus your liabilities.  Thus, there are basically two ways to increase net worth—increase assets or decrease liabilities.  The simplest step forward for new investors is to decrease liabilities.  The reason is simple.  If you decrease your liabilities, you will free up cash that can be used for purchasing more assets.  For example, let’s assume you have $10k of credit card debt, and you are paying $250 per month to pay off that debt.  Once this liability is erased, you will free up $250 per month that can be used to purchase an asset, which is something that will pay you over time.

Common Assets:

• Savings Account—This should be established right away.  This helps you cover unexpected expenses that come in day-to-day life such as appliance repairs, small medical expenses, etc.  This cushion allows you to not have to use a credit card

• Retirement Account—The ultimate long-term asset.  Steady investment yields strong compounding growth over a period of years and decades.  This could include forex trading.

• Real Estate—Although home prices can depreciate in the short-term, real estate is still seen as a major source of residual income for those who invest intelligently.

Common Liabilities:

• Mortgage—Usually a person’s largest liability in both dollars and years.

• College Loans—Depending on your situation, this is usually seen as good debt, since it is paying you in terms of earning potential throughout your life.

• Car Loans—If you are truly seeking to build your net worth, don’t keep buying a new car every few years.  Buy a car that is a few years old, pay it off, and then keep it for many years. 

Credit Card Debt—This should be first liability to pay off.