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  • Writer's pictureKen Kowach

Net Worth: What is it and Why Should I Care?

Updated: Feb 21, 2020

Bottom Line Up Front

Have you ever looked up how much a particular celebrity is worth? I do it all the time. I assume a lot of people do, but why is that we are so curious about how much certain people are worth but many of us don't even do the same for ourselves?

Tracking your net worth is such a valuable concept and it has such a strong benefit in doing so. Follow these simple steps below to see how we can do it, and ultimately why we should be doing it.

"I just think that we should take a serious self-evaluation in what it is we truly value."

Net Worth. What Is It?

dollar bills

Net Worth is simple. Ultimately, net worth is the dollar value of what you, or your household, is worth in dollar amounts. Sound simple enough? Let’s strip it down with a basic example.

In 2003, I left home with virtually nothing except the clothes that I was wearing. (True story). I got on a plane and then on a bus headed to Fort Benning, GA for U.S. Army Basic Combat Training. I had no money in my bank account from what I can recollect. Essentially, I had no assets – things of positive dollar worth, and I had no liabilities – debt or negative dollar worth. My net worth was $0.00.

Another example might be somebody who went to college and finished with $80,000 in student loan debt, with a savings account of $5,000. If this was all they had to their name, their net worth would be -$75,000. Yes, negative seventy-five thousand. A little crazy, I know. But let’s break it down.


Step 1: Add up all your assets

calculator and graph

Calculating your net worth is simple. First, add up all your assets. This will include any cash that you have, any money in your savings accounts, checking accounts, individual retirement accounts, stocks, bonds, etc. Also, you will want to add in possessions of significant value. This may include collectibles like valuable paintings, rare baseball cards, or rare vinyl records, or even a gun collection. If you own a home, this will get added in too of course. (This point is debatable to some, but don’t worry about that for now) Here is a list to help.

  • Cash

  • Checking accounts

  • Savings accounts

  • Retirement accounts

  • Investment accounts

  • Stocks

  • Bonds

  • Houses

  • Cars

  • Collectibles


Step 2: Add up all your liabilities

credit cards in a pocket

Once you have added up all your assets, now you have to subtract all your liabilities from it. Here is a simple example of what liability might be. If you own a $200,000 house, that’s a $200,000 asset. But if you have a $160,000 mortgage on it, that’s a $160,000 liability. Make sense? Add up all the following:

  • Credit card debt

  • Home mortgages

  • Car loans

  • Student loans

  • Personal loans

  • Any other loan I haven’t mentioned… (you get the idea)


Step 3: Subtract your liabilities from your assets

The last step is to take all your assets and subtract your liabilities from it. That’s it! Now you can figure out your net worth… and yes it is possible to have a negative net worth. Don’t be dismayed, it’s a journey, and we all start somewhere. If you are reading this to begin the journey, you’re on the right track and changing for the better, unlike the other millions of people continuing to live ignorantly in a giant hole of negative net worth.


So, Why Should I Care?

You may or may not have understood what net worth was before reading this, but this is far more important for me to share. What is the reason? Why track my net worth? What does it matter anyway? Well, it does matter. And for financial stability and success, it probably matters the most. Read on.

As I mentioned in the beginning, I started doing this a few years ago. It was crucial to changing my financial behavior and it really helped me identify what I truly valued. I thought carefully about the big purchases that I made or decided not to make. I used to own a newer model Tacoma, but I realized that I barely used it for its purpose. I might have used to pick-up truck bed maybe a handful of times over the nearly 3 years that I owned it. Also, my drive to work is, at the time of this writing, 31 miles one way. That thing got me 18 mpg…

So I traded it in for a used Nissan Sentra, which I am able to quasi-hypermile. I cut my monthly gas bill by more than half, and I spend far less per month on my payment for the vehicle, even with a 48-month loan, versus a 72-month loan that I had on the Tacoma.

This is just an example of the changes in behavior the self-awareness has caused in me. Some of you might be thinking, “well, I don’t want a tiny little car, I want that big Ford F-150 Raptor.” But I think that is fine too, I just think that we should take a serious self-evaluation in what it is we truly value. For me, it actually isn’t the type of vehicle I drive. I am learning that I value experience as a true millennial. Don’t get me wrong, I still like things. What I have realized though is that I primarily want “things”, or more correctly, “assets”, that produce passive income, so in the long run, I can eventually stop working and experience life.

Time is the great equalizer, and we are all allotted the same amount. We get 24 hours in a day, and we get an average lifespan of about 80 years depending on what country you live in. What I would like to do is maximize the number of years of trading in my time for money and be able to experience as much of God’s beautiful creation as I can.

ribblehead viaduct


Final Thoughts

If there’s one thing I can teach you to do, its to track your net worth. I personally use Personal Capital, because it is awesome. It provides a lot of robust features, where you can see changes over time to your overall net worth, changes in your credit card debt, changes in your asset column, and more. Once you sign up (and it is free by the way), just start adding your banking institutions to have it automatically start adding all of your accounts.

It works very well and very intuitively. If you aren’t a fan of giving another company access to all of your data, because you’re a bit paranoid, that’s fine. You can just use an excel spreadsheet like my buddy Matt, who runs this quirky little podcast, Last Chance. If you want a good example of a net worth excel spreadsheet, you can find one here at Vertex 42.

Until the next one, learn to track your net worth. Later


The Woke Hack


Time to Pay it Forward

Let me know if tracking your net worth is something that you do already and if it has changed your self-awareness, your habits, and your overall financial wellness. Let me know if you plan to! Comment down below.

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