Buffett and Gates Know Their Number. Do You Know Yours?
Warren Buffett and Bill Gates know their net worth (“their number”) just by reading magazines. But we should know our own net worth or how much we “are worth.” It is not just for rich people to know.
Any financial plan begins with knowing our net worth because it establishes a starting point. Knowing our net worth helps us to understand where we need to make improvements in our financial situation or how bad things really are. Warning: calculating our net worth does require some basic math and very basic accounting (don’t worry attached is a worksheet that can help).
What is net worth?
Net worth is simply our total assets minus our total liabilities.
Total Assets - Total Liabilities = Net Worth
The equation is the easy part. The calculation is challenging.
What is a “good number”?
Let’s just say we don’t want a negative net worth which means we have more liabilities than assets. Negative net worth is bad. The median household net worth, in 2002 (most recent Census Bureau numbers), was $58,905. This is low. Today, the median household net worth number is probably lower because of falling home values and volatile stock market.
Calculating our net worth can be an eye opening experience. An experience we should have considering our current economic situation. It will take some time to pull together account statements and doing an accounting of the assets and liabilities but it will be time well spent. This calculation should be reviewed on an annual basis or after a life changing event.
Here is a link to a Net Worth Calculation Worksheet (via Google Docs): Click Here. We hope this worksheet is helpful. Good luck.
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