Personal Finance

Money tip – Calculate your net worth

Are you wealthy? The answer to this question really depends on how you define wealth? Does wealth mean that you have a certain amount of money? Does wealth mean that you drive a fancy car or live in a big house? Does wealth mean that you have achieved financial independence?

According to Thomas Stanley and William Danko, authors of the best sellers The Millionaire Next Door and Millionaire’s Mind, wealth can be determined by the following formula:

Take your age and multiply it by your gross household income from all sources. Divide by ten (10). This is what your net worth should be.

This is one definition of wealth but not the only definition of wealth.  For most people, the most common way to determine your wealth is determining something called your net worth.

What is net worth?

The definition of net worth is very simple. Your net worth is equal to all of your assets less all of your liabilities. It can be complicated depending on what you define as an asset and what you consider a liability. For example, is your $1,000 big screen TV considered an asset? More importantly, should it be used to calculate your overall net worth?

For the purpose of retirement planning and wealth planning, I would argue that you should not consider the TV as part of your financial net worth. In my mind, your financial net worth is slightly different than your total net worth because you only want to consider assets that may be used as a retirement asset or truly relevant to your financial wealth.

Knowing your net worth is a very important aspect of personal finance. How can you know if you are getting ahead financially if you have no way to track or measure your wealth? If you want to have a benchmark for wealth, retirement or financial fitness, make sure your starting point is your net worth.

I equate knowing your net worth for wealth management to knowing your weight for weight management. Creating a net worth statement is a basic skill you should know and practice regularly.

How to calculate your worth?

Down below, I will give you a list of tools and resources to help you figure out your net worth but really all you need is a pen and paper.

Take a piece of paper and draw a line down the middle of the page from top to bottom. On the left side of the page write down all the assets that you think contribute positively to your financial well-being (not depreciating assets). On the other side of the page, list all your debts or liabilities. At the bottom of the page, take your total assets and subtract your total liabilities and you will have your net worth.

Once you have this starting point, every year, you should redo this calculation to see if you are moving in the right direction. Understanding your net worth is the starting point to financial planning and wealth management.

Personalize your net worth statement

There is no shortage of tools and resources out there to help you figure out your worth. In my opinion, use the one that works best for you.

Here’s a link to a net worth statement I give out to people who attend my financial workshops or want to come see me for financial help. It’s designed to be the best or the worst but a great starting point.

Net Worth Statement

Here’s a link to an excel spreadsheets. There’s nothing fancy about these worksheets but that’s really the point. It does not have to be fancy. Incidentally, this is the spreadsheet I’ve been using for years (the long term tab). My net worth spreadsheet is personalized for my needs and I would encourage you to do the same for yourself. Take this template and personalize it to your assets and liabilities.

Excel spreadsheet to track net worth

For those of you that prefer links to online calculators, try this one from –

Personallym I don’t use online calculators to calculate my net worth so if anyone wants to share a tool they use and find helpful, please share in the comments.

Why is net worth important?

In the process of financial or retirement planning, it is especially important to have a measuring stick. In the area of health and fitness, we use weight as a benchmark. If we are overweight, we try to lose some by eating better or exercising more.

In financial planning, net worth is one of the most commonly used benchmarks. Your goal in retirement planning should be remarkably simple – While you are in the accumulation phase, your goal should be to increase your net worth every year.

Two ways to increase net worth

Most often, when we think of increasing net worth, we think of accumulating assets. There is no question that one of the ways to increase your net worth is simply to accumulate more assets. Forced savings plans are one of the best ways to systematically accumulate assets to add to your net worth. Assets like mutual funds, stocks, real estate, GICs are all assets that help build up the asset side of the net worth equation.

Sometimes the other side of the equation is forgotten when it comes to increasing net worth. It is important to keep in mind that reducing debt will also contribute to your net worth positively. Paying down debt like mortgages, lines of credit and credit cards will all reduce liabilities and enhance your net worth. It is also worth mentioning that going into debt is not good for your net worth unless the money is used to enhance your assets. For example, buying real estate is good even though you have to go into debt to do it. However, buying a big screen TV on your credit card would not be considered a positive contribution to your net worth. I know some of you may jokingly disagree but remember your TV is a depreciating asset for personal use. Few experts would consider a TV a solid retirement asset.

Your homework

So, do you know your net worth?  I ask this question of people every single day and more often than not, people have to think pretty hard about what is their net worth. If you want to have a benchmark for wealth, retirement or financial fitness, make sure your starting point is your net worth.

If you’ve never tracked your worth, it’s time to get started. Using any of the strategies above, make it a priority to complete your net worth statement.

For those of you who are more seasoned at this, help others by sharing he tools, calculators and strategies your use to calculate your net worth.

If you have any doubts about how to calculate your net worth, consult a financial advisor for help.


  1. Bill

    I use Excel monthly. After much thought I leave my home off the list. Why? I don’t plan on selling it anytime soon. The price fluctuates year to year. Any price I use is an estimate, as what it is worth is really only determined when I sell. Finally, I fear it ‘distorts’ the view of my net worth. In a concession to tracking I have the market value assessment of my home (once per year) after I calc. my NW. I also leave off my vehicle (paid for anyways) and furnishings.

    So the focus is on my liquid assets and investments. I do include my mortgage since I have to pay that off. However I can control the risks with investments and how much I pay my mortgage. It works for me. and that’s the main point.

    • Jim Yih

      Thanks for sharing Bill. Many people debate the items that belong on the Net Worth Statement. Personally, I do not include depreciating assets like cars. I also do not include personal assets like furniture, clothes, etc. I call these lifestyle assets and I do not think they contribute to my wealth.

      I do include the house in my net worth statement because it is a significant asset and although I do not plan to sell it, I still can access the equity if needed.

      It’s important to use the net worth statement the way you think it should be used. In other words, it is personal. That’s why I appreciate you sharing as it will help other people think.

  2. Nate

    Great explanation of figuring out your net worth. One thing I would add is that it’s a good idea to check your net worth every year or so, and see how well you are doing at increasing it. That way you’ll spot problems before they have time to really hurt your financial situation.

    • Jim Yih

      thanks Nate!
      I could not agree more. If you look at the down-loadable excel sheet in the post, you can track your net worth year by year using one worksheet. This is what I use.
      Have fun!

  3. CF

    Nicely formatted! What do you include in “other assets”? Do you bother including retail consumer items – laptops, tvs, etc?

    I started keeping track of my net worth two years ago and have found it to be an excellent motivational tool.

  4. Bernie

    I really enjoy your retirement blog, especially as I’m also retired now.

    I have a question on calculation of Net Worth that puzzles me. I have a company pension plan that pays me a fixed monthly distribution. Net Worth statements typically ask a dollar figure amount of registed pension plans. This info isn’t known for my pension plan. Is there a way to calculate this figure from my monthly distribution?

    • Paul Rastas

      I have been monitoring my net worth for over 30 years, and I have always ignored the value of my wife’s defined benefit pension plan as I do not feel that including it adds value to the exercise of monitoring changes in net worth. While it contributes huge value to your lifestyle, it is not really an available asset other than the monthly cash flow. It cannot be transferred, assigned or bequeathed.
      The value however can be quantified as divorce lawyers will attest.

      If you really need a guess of value, a reasonable guestimation formula follows.

      The monthly payment, say $1,000, times 12 indicates an annual return of $12,000. Take the $12,000 and divide by a reasonable long term interest rate, say 4% to get $300,000. The $300,000 represents the approximate value of an indefinate cash flow stream of $1,000 per month at a 4% return. A larger assumed rate of return will indicate a smaller value and vice versa.

      Note that the $300,000 in this example represents the value of an indefinite cash flow stream. If you are age 60, this is still a reasonable estimate of the value of this cash flow for the rest of your life. However, as you age, the value diminishes as the cash flow terminates at death. To get an approximation of the value at any age you might multiply the $300,000 by a factor of the number of years to age 90 divided by 30. ie, at age 60, the value would approximate $300,000 x 30/30 = $300,000. At age 75, the value would approximate $300,000 x 15/30 = $150,000.

      Note that these ‘calculations’ result in oversimplified estimates only. The real value is influenced by the chosen interest rate, actuarial lifespan estimates, survivor benefits if any, and other factors.

      Contact the pension plan administrator for a more precise valuation.

  5. Gail

    If I take my CPP at 60 will this in any way affect my Registered Pension Plan that I have with my place of employment. It will give me about $200/month if I start to draw this by the end of this year

    • Rod

      Hi Paul- I agree to leave out a Defined Pensions Plan amount from Net Worth. If included, shouldn’t we also include earned CPP and OAS benefits?

      By your calculation, maximum CPP benefits for a couple at age 65 would be ($1,204 x 2 x 12 )/4% = $722,400. Using the age factor, it reduces to 25/30 x $722,400 = $602,000.

      Similarly, maximum OAS for 2 at age 65 would be )$643 x 2 x 12)/4% x25/30 = $386,000.

  6. Gail

    If i take my CPP at 60 will this in any way affect my Registered Pension Plan that I have with my place of employment or my early CPP. It will be about $200/mon if I start to draw this by the end of this year.

  7. Dale

    Give this one a try. It is comprehensive, yet simple to use.

  8. Paul Rastas

    Interesting discussion, Jim.
    I agree with Nate, that you should update your net worth regularly to see how you are doing. For the same reason, I include my home, cars and boats. After a couple of years it becomes very apparent what is a good investment (home) and what is not an investment at all (cars and boats). It is however informative to see how different classes of assets change in value from year to year. This could perhaps give you some direction as to judicious allocation of resources. If the house, vehicles and vessels are financed, you MUST include the debt in the liabilities section; why would you not include the assets in the assets section?

    Most people will include the RRSP on the net worth. Fair enough, but what is not well understood or practiced is that you MUST also include the inherent tax obligation as a liability. Otherwise you are significantly overstating your net worth, as the RRSP is not fully liquid without incurring some level of tax, close to 50% if the RRSP is in six figures.

    • Rey mayo

      I think net worth is starting point. What is important is how you maintain your net worth while maintaining your personal lifestyle and standard of living on a monthly basis.

      • Paul Rastas

        Agreed that net worth is a starting point. Then it becomes more useful as you check the net worth periodically to see how you are progressing, like a financial report card. If net worth is deteriorating it is an indication that perhaps you are overspending on lifestyle and standard of living, possibly by using your home equity LOC as an ATM. This is not a short term monthly exercise, but an indicator over a several year period. For example, over a five year period your vehicle value might go from $40,000 to $10,000. If your vehicle debt went down by a similar amount then your net worth does not suffer. Your home value might have gone from $500,000 to $600,000. If your mortgage debt went down during this period, your net worth (wealth) is growing. If your home equity LOC went from $300,000 to $450,000 it is an indicator of trouble ahead, unless the $150,000 in advances went to some other measureable investment on your net worth schedule.

    • Fred

      A couple of comments on the tax obligations (a liability). It was mentioned that the vealues need to be discounted and the number of 50% was suggested. This would be so if it was all taken out at once (or if you already had enough income to push you into the 50% marginal tax bracket). In practice most will be withdrawing more slowly and likely be taxed at 25-30%. Of course, your heirs (except if it is your spouse) would be subject to tax at the higher rate as the whole registered plan needs to be collapsed. The government will get their money eventually!

      A similar, but perhaps less impactive item, is any unrealized capital gains in a non-registered (except TFSA) account 50% of which would be subject to tax when the assets are sold.

  9. Rod

    I use the BC government’s Assessed Value amount for my house, when I calculate my annual net worth. This is much easier than trying to put in a number based on wildly fluctuating changes in real estate market values.

    A few years ago I tried to calculate our Net Worth if my wife & I were to die December 31st; i.e. what $$$$$ would our 3 children inherit?. Taxes on our RRSP’s, RRIF, and Non-registered Margin investment account were staggering! Don’t forget Probate, legal & Realtor fees to sell the house, etc., In all, it reduced our Net Worth by 30%.

  10. Cindy

    Question: If you use your Home Equity LOC to invest with, assuming the return is more than the amount invested, would that be considered a ‘measurable investment’?

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