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What Is Net Worth & How To Calculate It?

If you’ve ever asked yourself “What’s my net worth?” Then blog will tell you exactly what you need to know. By the time you’re done reading this, you’ll know how to calculate your net worth in seconds.
May 3, 2021

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The term net worth is used often in the context of financial prowess (and bragging rights). For example, Jeff Bezos’ net worth is $177 billion and he is the richest person in the world. 

But calculating net worth isn’t reserved for the ultra-rich. Regular investors and salaried professionals can calculate their net worth using a simple formula (Scroll down if you want to skip right to it!).

What Is The Net Worth Of A Person?

Net worth is calculated by subtracting the total liabilities from the total assets that a person owns. This will give you a snapshot of how much you’re financially worth.

Furthermore, knowing your net worth can help you understand if you’re on track to achieve your financial goals. It can help you analyze your spending habits.

Read this blog to know how to save money from your salary

How To Calculate Net Worth?

You’ll need two things to calculate net worth: your assets and liabilities. Here’s how you can compile both and figure out your net worth. 

1. Calculate Assets

Assets may include (but are not limited to): 

Add each of these to calculate the sum total of your overall assets. 

2. Calculate Liabilities

Liabilities basically mean the debt you owe that may include (but is not limited to):

  • Credit balance: credit card, credit received from broking app or company
  • Rent payable: home, vehicle, appliances, furniture
  • Mortgage: home loan, property loan
  • Personal loan: wedding, gold, silver, healthcare
  • Borrowings: cash or cash equivalents
  • Tax: Income tax, capital gains tax, property tax 
  • Overdraft: for sole traders and partnerships

Add each of these to calculate the sum total of your liabilities. You’re now ready to figure out your net worth. 

3. Calculate Net Worth

Subtract your total liabilities from your total assets to know your net worth. 

Total Assets - Total Liabilities = Net Worth 

Remember:

  • Net worth will be positive if your total assets are more than your total liabilities
  • Net worth will be negative if your total liabilities are more than your total assets

Struggling with a poor net worth? Get Cube For Free to access expert advice from leading industry experts like Wealth First and RIA, Rick Holbrook. 

Calculating Net Worth With An Example

Mr Cube has ₹1,00,000 worth of investments; ₹10,00,000 worth of properties; ₹50,000 in the savings account. Mr Cube owes a credit card balance of ₹10,000; ₹70,000 in loans; ₹20,000 in tax.

 

Mr Cube

Assets

Liabilities

₹1,00,000

₹10,000

₹10,00,000

₹70,000

₹50,000

₹20,000

Total A: ₹11,50,000

Total L: ₹1,00,000


Mr Cube’s net worth:

₹11,50,000 - ₹1,00,000 = ₹10,50,000

Net Worth Calculator


Why Is Net Worth Important?

It’s difficult to track every rupee you earn or spend and that’s where knowing your net worth can be useful. It’ll give you a broad idea of your financial health, spending habits, and wealth creation goals. 

You’re in good shape if your net worth is positive. It’s time to go back to the drawing board if your net worth is negative. Thus, tracking your net worth quarterly could help you plan for the future.

Want To Increase Your Net Worth? Invest using the Cube Wealth App 

FAQs

Q. What Is An Example Of Net Worth?

Ans. Assume you earn ₹2,00,000 per month and spend ₹1,20,000 a month. Your net worth at the end of the year would be: ₹24,00,000 - ₹14,40,000 = ₹9,60,000.

Q. How do you calculate your net worth?

Ans. To calculate your net worth, simply add your assets and subtract all your liabilities from them. You can use this formula to calculate net worth: Total Assets - Total Liabilities = Net Worth.

Q. Is net worth actual money?

Ans. Net worth indicates your actual financial value or the total value of your assets minus your liabilities. Thus, it may be a combination of actual money (cash or cash equivalents) and assets (investments, property, lending).

Watch this video to build your net worth through investments like Mutual Funds, Stocks, Digital Gold, and more


Shriram Shekhar
Shriram is a Consultant at CubeWealth. He has developed cutting edge IT products for over 2 years before turning to his passion for the written word. His love for philosophy, developing products, and empowering people through quality content is what got him to CubeWealth.

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