KANSAS CITY, Mo. -- Financial expert Kathy Stepp says it’s a good idea to know your net worth every year. The number works as a financial “report card”. By keeping track of your net worth each year, you will know how you are progressing toward meeting your financial goals. Stepp says net worth is a measure of financial value as of a particular point in time. It measures one’s worth as if all assets were sold and all liabilities were paid at one time. In other words, net worth equals assets minus liabilities.
To calculate your net worth Stepp says to list all assets at their fair market value as of some date in time (Dec.31, 2016, for example) and then list all liabilities as of the same date. The fair value of the liabilities is the pay-off amount as of the same date. Subtract the total liabilities from the total assets to calculate the net worth as of that particular date.
According to Stepp, if net worth is a positive number, the assets have more value than the liabilities. If net worth is a negative number, the liabilities are higher than the assets. If this is your situation, you will need to work to save more and pay off debts. Stepp explains these more in-depth in the video above.