Many of us wonder what we are worth. Im not talking about what were worth as people. which is an entirely different concept. Im talking about what we are worth in monetary terms.

In most cases, this is a fairly simple exercise. Net worth is determined by subtracting your liabilities from your assets at a specific moment in time. If you have more assets than liabilities, you have a positive net worth. If your liabilities overwhelm your assets, your net worth is negative.

The goal is to work towards a positive net worth, which indicates that you can pay off all your debts if you need to, or youre already debt-free. In this way, net worth can be one measure of your financial health and well-being.

How to Determine Your Net Worth

Determining your net worth is fairly straightforward. You list and add up all your assets and all your liabilities. Then, you subtract your liabilities from your assets. Since determining your net worth is similar to taking a financial snapshot, you dont consider your annual income, but rather how much money you have in the bank right now. If you want your net worth to be higher, calculate it immediately after you deposit your paycheck.

Assets

Your assets can be defined as everything you own that has monetary value. They may be liquid like a checking account or non-liquid like your home. If an asset is liquid, it simply means you dont have to sell it first to realize its monetary value. A few general examples of assets are:

• The market value of your home.
• The market value of your vehicles.
• The money in your investment accounts (including your retirement accounts and life insurance contracts).
• The amount you have in your checking and savings accounts, including CDs and money market accounts .
• Notable items of value you own, such as artwork, furniture, fine jewelry, or collectibles .

Since items like artwork and jewelry can be highly subjective, only include them as assets if you have had them professionally appraised or have a good sense of what someone would pay for them in todays market.

Liabilities

Liabilities, unlike assets, represent a drain on your resources. These are obligations you have to pay. Your total liabilities arent determined by monthly payments owed, but rather by the entire debt you owe. Examples of liabilities include:

• Mortgages
• Car loans
• Credit cards
• Student loans
• Outstanding medical bills
• Back taxes
• Liens and judgments against you

Many people find that they have a negative net worth, thanks mainly to their mortgage debt and car loans. Credit card debt and student loans also have a big impact on your overall net worth. Case in point, the student loans my husband and I have are a big reason why our net worth is negative right now.

Calculating Your Net Worth

Once youve listed all your assets and liabilities, you can calculate your net worth by subtracting your liabilities from your assets. Here is an example: