How to Calculate Your Net Worth

Net worth is simply the value of everything you own minus everything you owe. If you sold all your assets today and paid off all your loans, what would be left is your net worth.

It can be positive, zero or even negative, for example for a young person with a large education loan and few savings. That is not a disaster; it is a starting point.

Write down every asset with its current value:

• Bank balances and fixed deposits.
• Mutual funds, shares and bonds.
• PF, PPF, NPS and similar accounts.
• Gold, silver and jewellery.
• Your home and any other property.
• Vehicles, at a realistic resale value.
• Money others owe you, if you are confident it will come back.

Write down every liability with the amount still outstanding:

• Home loan.
• Vehicle loan.
• Education loan.
• Personal loans.
• Credit card balances.
• Money borrowed from family or friends.

Use the outstanding principal from your latest loan statement, not the total of all future EMIs.

Total assets minus total liabilities equals your net worth. That is the whole calculation.

For example, if your assets add up to Rs 40 lakh and your loans add up to Rs 15 lakh, your net worth is Rs 25 lakh. These figures are only for illustration.

For mutual funds and shares, use today value from your statement. For gold, use the current rate for the actual weight. For property, use a realistic estimate of what it would sell for today, not what you hope.

Our page on how to track your portfolio explains how to get the current value of all your funds in one place.

People often overestimate the value of their home and underestimate how quickly vehicles lose value. Use cautious numbers. A car bought a few years ago may be worth much less than you think.

Your home is an asset, but you live in it. You cannot easily spend it in retirement unless you sell or move. Many people track two numbers: total net worth, and investable net worth, which leaves out the home you live in.

Investable net worth gives a clearer picture of money that can fund goals like retirement. Our page on investing for retirement explains why this matters.

Pick a date, like the start of the financial year or your birthday, and calculate your net worth every year. Write it down. Over the years, you will see whether it is growing steadily.

Do not worry about short-term drops caused by market falls. Look at the trend over several years.

• Saving regularly from income.
• Investing those savings in assets that can grow.
• Paying down loans, especially costly ones.
• Avoiding new debt for things that lose value.

Our page on how much to invest helps you set a realistic monthly saving.

A high net worth tied up in property or a business may still leave you short of cash for emergencies. Net worth also does not show whether your money is in the right places for your goals.

Pair it with a check of your emergency buffer and your asset mix. Our page on asset allocation explains how to balance assets.

Couples can calculate a combined family net worth as well as individual ones. Combined numbers help with shared goals; individual numbers help each person understand their own position.

Our page on investing as a dual-income couple explains how to plan together.

Make two columns on a sheet. Left: assets with values. Right: liabilities with amounts. Total each column, then subtract. Save the sheet with the date. Next year, copy it and update the numbers.

It takes less than an hour, and it is one of the most useful money habits you can build.

Online lists of "how much you should have by 30 or 40" can make people anxious. Every family situation is different. Compare your net worth only with your own previous years.

If your net worth is not growing, look at why: too much spending, too much debt, or savings sitting idle. If most of it is in one asset, consider spreading it out.

Our pages on setting financial goals and diversification can help you decide the next steps.

• Using the purchase price of property or vehicles instead of today value.
• Forgetting small loans, credit card balances or money owed to relatives.
• Counting money that someone owes you but is unlikely to repay.
• Including the full value of jointly owned assets twice, once for each partner.
• Leaving out PF, PPF or NPS balances, which are often large.

Getting these right gives a more honest picture.

Two simple ratios can add insight. First, how many months of expenses your easily accessible savings could cover. Second, how much of your net worth is in financial assets like funds and deposits compared with property.

A family with a high net worth but almost nothing accessible can still struggle in an emergency.

• Net worth = what you own minus what you owe.
• Use current values, conservatively.
• Track yearly and watch the trend.
• Grow it by saving, investing and cutting debt.

We are distributors rather than investment advisers and we recommend no schemes. If you want help building a net worth sheet for your family, get in touch.