Calculating Your Net Worth
Bob The Banker
Robert Friel Bob The Banker
Published on July 28, 2022

Calculating Your Net Worth

Do you want to know how to determine your net worth? In this video, I’m going to show you how to calculate your net worth to help you prepare for your future. We’ll explore everything from assets and liabilities to net worth age brackets while enjoying the beautiful Sylvan Lake State Park.

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Why Net Worth Matters

Because of inflation fears, interest rate increases, and the expenses of everyday life, lately our clients have been asking how to determine their net worth. A lot of people that start the preapproval process think that just because you can pay your debt, life is okay. However, determining your net worth is important.

Ultimately, most people don’t want to work for the rest of their lives, so this is something you need to know about. So today, we’re going to look at average net worth by age to see how you compare, show you how to determine a liability and an asset, and give you access to a free downloadable spreadsheet that will make it easy to figure out.

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What You Own And What You Owe

What is net worth? Simply put, this is what you own versus what you owe. For instance, you might have a car, a house, and some money in the bank. You’re going to add all of those things up, which are called assets. While it may seem like you have a substantial amount, you also have to factor in what you owe.

Net worth is the combination of what you own (your assets) and what you owe (your liabilities). Together, these make up your personal net worth.

Measuring Your Progress

Knowing your net worth is important for two basic reasons. First, it lets you get a snapshot of your current financial situation and gives you a reference point for measuring your progress towards your goals. Just like anybody that’s trying to lose weight, stepping on the scale can be a major metric of your progress.

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If you’re trying to run a marathon or a 5 or 10k, you start out walking, gradually start jogging, then begin running a little quicker and timing yourself. Those are all metrics of your progress. Similarly, knowing what your net worth is will help you figure out when retirement can happen or when can you quit your job and open up a business. It gives you a little bit of extra wiggle room in your finances to know exactly where you’re at.

As you continue to dial in your budget, make more money, and save more money, your net worth is going to continue to grow. If your net worth is lower in the red, you’ll need to work on saving more and spending less. To watch your progress, calculate your net worth and recalculate it a few times a year. I recommend doing so every month.

Your Net Worth Spreadsheet

Now we’re going to show you how to set up your net worth spreadsheet. On a scratch piece of paper, take a few minutes to list out your assets. Again, this is anything of value you own. Some people are going to include liquid bank accounts, stock investment accounts, their car, and the market value of their home.

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Additionally, if you own a business, include your business interests. You’ll also want to list personal property like jewelry, art, and furniture. Don’t forget the cash value of insurance policies. Once you’ve listed out all of your assets, you’ll want to list your liabilities.

Lately, some people I’ve worked with tell me they don’t have any debt. However, when I pull their credit report, they have an auto loan, a student loan, a mortgage loan, and credit card debts. This is usually because some people think that paying their monthly installments of that debt means they’re not in debt. However, to figure out your true net worth, you want to include anything you owe where your statement does not come out as $0.

Adding And Subtracting

Remember, your liabilities include any balance that you have on your mortgage, car loan, credit cards, and student loans. Take your assets, add them all up, and then subtract your liabilities. This will determine your personal net worth.

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Is your net worth positive or negative after that quick and dirty calculation? Hopefully, you’re in the positive—but if you’re in the negative, don’t fear. There are things that you can work on to improve, like getting some of those liabilities paid off or getting more assets into your portfolio.

Positive And Negative

To recap, your net worth can be described as either positive or negative. The former means that the assets exceed liabilities. The latter means that the liabilities exceed assets. Positive and increasing net worth indicates good financial health. Decreasing net worth, on the other hand, is a cause for concern, as it might signal a decrease in assets relative to liabilities.

If you’re like me, your net worth may fluctuate up and down. If you have the desire to retire early, keeping your finger on this pulse is definitely important. One of my goals in the next decade is to accumulate enough assets to where I can effectively quit my day job, go back to a flip phone, and not have to worry too much about helping people with their mortgages.

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Although I love helping people, it would be nice to be able to come up to a place like Sylvan Lake, play a game of golf, or go boating any given day of the week without having a care in the world.

Median Net Worth Numbers

If you want to know where your net worth compares, let’s look at the median—which is the middle of the metrics. The average net worth is going to be skewed a little bit more because there’s a bellwether curve. This means the higher the highs and the lower the lows, the more the numbers are skewed.

If you’re less than 35 years old, the median net worth is just under $14,000 while the average net worth is $76,300. If you’re 35 to 44 like me, we’re looking at a median net worth of just above $91,000 and an average net worth of $436,200. From 45 To 54, the median net worth is $168,600 and the average net worth is nearing the million dollar mark—about $833,000 and change.

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As you get a little bit older into the workforce, those 55 to 64 have a median net worth of $212,500. The average net worth of this group finally gets above $1 million at $1.175 million. Those early retirees—ideally in the 65 to 74 range—are slightly above the last age bracket. Their median net worth is $266,400 and the average net worth is $1.217.

If you’re above 75, you’re going to see a dip here in these two numbers compared to the last. This is because, ultimately, life gets a little bit more expensive with medical bills. You’re starting to draw more directly from your assets, and your average net worth would have dipped below that million dollar mark to $977,000. Additionally, the median net worth for this group is $254,800.

Maximizing Your Money

How did you fare in relation to your age bracket’s median and averages? Hopefully, you are above the median and nearing that average, at the very least. If not, it’s time to put together an action plan. A great place to start is using our net worth spreadsheet.

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You can also let me know if you would be interested to learn how to maximize your savings with a zero-based budget where you pay yourself first. This way, every dollar is accounted for and you learn how to save money using sinking funds for any large purchases or bills that come up throughout the year. Sinking funds have been a wonderful addition to my portfolio, and I’d be happy to help you learn more.

Ultimately, we’re all in this together. So if you want to grow your net worth alongside me, feel free to reach out and I’ll be glad to connect. Don’t forget to subscribe to my channel, and stay tuned to see what I feature next!

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Bob The Banker
Robert Friel Bob The Banker
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