There’s a good chance you’re most familiar with the concept of net worth as it pertains to celebrities and the ultra-wealthy. Business and pop culture outlets often rank figures by their estimated net worths. But this metric is also useful for determining your own financial health.
What Is Net Worth?
Net worth is the cumulative value of assets an individual, family, business or organization owns minus the liabilities they owe. As an individual, your net worth is the value of all the things you own — your electronics, valuables, car and/or home — minus your debts, such as your credit card balance, student loans, medical bills and/or mortgage.
How To Calculate Your Net Worth
Net worth is often an estimate. If you own your vehicle outright, how much is it worth? The answer, as with anything, is as much as somebody’s willing to pay for it.
There are several used vehicle value calculators available. Let’s say you use one and find your vehicle is worth about $10,000. Let’s also say you just purchased a home for $1,000,000 with a $300,000 down payment and a $700,000 mortgage. To make things simple, let’s also say all your other worldly possessions are worth about $5,000, you have $10,000 in savings and $15,000 in student loan repayments.
In this scenario, your net worth math looks like this:
$1,000,000 + $10,000 + $5,000 + $10,000 = $1,025,000
$1,025,000 - $700,000 - $15,000 = $310,000
Your net worth would be $310,000.
How To Track Your Net Worth
Your net worth changes often. However, unless you win the lottery or strike gold in your backyard, your net worth is unlikely to change quickly. In most parts of the country, real estate dependably increases in value over time. So if you own property, that will probably increase your net worth.
Similarly, a high-yield savings account will also add to your net worth as time progresses. Investments can go up or down. A mutual fund is low risk and will probably increase your net worth over the years, but there are no guarantees.
There are normal patterns that will decrease your net worth over time, too. Many assets depreciate. Your car, computer, phone and other items all lose value every day until you have to buy a new(er) one. But then some assets might appreciate, such as gold jewelry or that Honus Wagner baseball card you have stored next to your Stradivarius violin.
Tracking Your Net Worth With Vectra Bank
For an up-to-date assessment of your home’s value, you can arrange for an appraisal. Keep in mind, though, that this can have property tax implications. Apart from property, tracking most of your net worth involves little more than logging into your banking app or website and looking at the balances of your debts and the appreciation of your savings account and investments.
Want to learn more about your personal net worth? Contact a Vectra Bank professional today!
