Determining My Net Worth
Posted on February 19, 2006 20 Comments
What are you worth?
There’s a classic scene on Sex and The City where super chic Carrie tries to buy her flat, only to realize she has no savings because she’s spent $40,000 on shoes over the years. While Carrie could have been building up her personal finances, she poured her earnings into footwear, leaving her with very little net worth!
What is net worth? I did a quick search online and found this definition at investorwords.com:
“For an individual, the value of a person’s assets, including cash, minus all liabilities. The amount by which the individual’s assets exceed their liabilities is considered the net worth of that person.”
In order to understand this definition, I did a little digging into the meanings of assets and liabilities. From the same Web site, I found these definitions:
ASSET: (Perhaps unsurprisingly, this does not refer to any of our super-scrumptious body parts, as in, “Hey baby, check out THESE assets!” Not that I’ve ever actually said that, but believe me, I’ve thought it! Woo-hoo!)I modified the definition a bit to only encompass the individual, rather than a business.
“Any item of economic value owned by an individual, especially that which could be converted to cash. Examples are cash, securities, real estate, a car, and other property. On a balance sheet, assets are equal to the sum of liabilities, common stock, preferred stock, and retained earnings.
From an accounting perspective, assets are divided into the following categories: current assets (cash and other liquid items), long-term assets (real estate), prepaid and deferred assets (expenditures for future costs such as insurance, rent, interest), and intangible assets (trademarks, patents, copyrights, goodwill).”
Admittedly, I don’t really understand that definition.
To my trusty copy of “Home Buying for Dummies.” Anything with “For Dummies” in the title will clearly help me on this. Here’s the definition:
“…financial things of value that you own, such as bank accounts, retirement accounts, stocks, bonds, mutual funds and so on… (p. 12).”
That’s a bit more clear. Own a towering collection of used Manolos? Sorry, they don’t count. No one’s paying cash for your used shoes – that’s really all they are, after all. However, you may want to consider appraising your engagement ring for your assets column, because it does have financial value. 401k? Inherited art collection? Real estate? Those are assets with real financial value.
“Home Buying for Dummies” has a definition for liabilities, too.
“Debts.”
Seriously? That’s it? What does investorwords.com say about this?
“An obligation that legally binds an individual or company to settle a debt. When one is liable for a debt, they are responsible for paying the debt or settling a wrongful act they may have committed. For example, if John hits Jane’s car, John is liable for the damages to Jane’s vehicle because John is responsible for the damages…
…Current liabilities are debts payable within one year, while long-term liabilities are debts payable over a longer period.”
Simple enough. Any debt you owe to any lender is considered a liability.
Let’s go back to the original definition of net worth. “The amount by which the individual’s assets exceed their liabilities…
I get it. Now let’s see how it applies to me.
I have never done a net worth calculation before (shocker!) because I’ve been too afraid of what I might see. I mean, who actually wants hard evidence that they have, literally, no value? Or worse – that they have a negative value? For me, the thought that my personal net worth might be negative was like a punch to the stomach. I’ve been working hard, staying on track my whole life – I’ve held a job consistently since I was 14, I graduated every school I’ve attended with honors and I’ve never been in any real trouble. And yet, my net worth could have been absolutely no different than someone who did the opposite of those things. What would that say about me? About everything I’ve achieved with my life? About everything I stand for?
“Sorry Nicole,” I imagined the net worth calculator god would say, “You’ve been working really hard all these years with nothing to show for it. All your intelligence, your accomplishments have been for naught. In the end, these things might make you feel good about yourself and who you are, but you can’t build a life on educational honors and professional recognition. Your net worth is negative. Your bottom line is nothing.”
Then, POOF!, just like that, he’d blow me into the wind, back into reality, where I’d continue to toil away for years to come with nothing to show for it.
Obviously there is no calculator god. And yet, I absolutely dreaded the entire net worth exercise. Until today.
I’ve sensed for a few weeks that my net worth may be about to change from the negative to the positive (based on the financial year-end wrap up entries I wrote to conclude 2005).
A quick Google search turned up what I believe to be a solid net worth calculator that guides users through their asset and liability columns. You can get the calculator here.
After a few deep breaths I completed the exercise. The result, for me, was reassuring. My net worth is turning around.I’m currently worth (drumroll, please…) a grand total of approximately $2,800.
Not a huge amount. But not a negative amount, either. And from what I can tell, if I continue on the path that I’ve set, and don’t incur any additional debt for the next year or two, that amount will rise to nearly $10,000 by December 2006 and perhaps $20,000 by December 2007. Now those are bottom lines to be proud of.
It seems to me that everyone reaches important crossroads at various stages of life. For me, I’m standing at a crossroad now. Behind me is a world of worry, financial instability, dread and insecurity. Ahead of me is the knowledge that I can someday support myself confidently and perhaps support a family, too. It’ll take a year or two to cross that road, and while I’m in the midst of traffic, I’m certainly vulnerable to a big bus or a semi truck that may knock me over, push me down. But if I keep my head up, my ears attuned and my eyes open, if I make good choices that help me cross that road a little faster, I’ll be in a place I’ve been dreaming about for years. The land of financial stability and independence is still far, and the road is treacherous, but now, for me, it’s attainable.
Category: Money
Tags: Net worth
Comments
20 Responses to “Determining My Net Worth”
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February 19th, 2006 @ 3:44 am
Nicole,
Here’s one of my favorite websites that has tons of financial calculators. There’s even a calculator that will tell you how long it will take you to become a millionare. It’s called “Cool Mil”.
Enjoy!
http://www.dinkytown.net/
February 19th, 2006 @ 4:50 am
Great post. Finding out actually where you stand financially can be one of the hardest things to do. When we found out our combined net worth, we were pretty depressed. Now, though, we have a common goal of debt eradication!
February 19th, 2006 @ 11:58 am
I love SATC (of ten DVDs that I actually feel are worth owning, seven are the SATC sets). I remember the episode you are referencing and I remember watching it the first time and it hit me, hard. I realized that I could have really great things and no money, or I could have money with the option to spend it on really fabulous things. I decided that it was better to make the choice myself, rather than the way it seemed Carrie felt, where the things chose for her. She didn’t even realize she had spent all that money until it was too late.
February 19th, 2006 @ 12:18 pm
Applaud yourself for doing the calculations. You’re over the scary part. Hopefully knowing what your current net worth is will motivate you to see it grow!
February 19th, 2006 @ 1:41 pm
Thanks for posting that calculator. I’ve used this site (Networth IQ) before, but it’s not as thorough. And hey, your net worth may not be as high as you would like it, but at least it’s a positive number! Keep it up.
February 19th, 2006 @ 2:19 pm
Even if your net worth is small, it’s going to grow if you tend to it and nurture it. So good for you on taking the first step and figuring it out!
February 19th, 2006 @ 2:58 pm
I just had a net worth epiphany too. I thought I was shackled to a negative number only to find out it was actually positive. HALLELLUJAH!!
Congrats on taking the plunge. Keep up the good work and it’ll continue to grow.
Luv ur blog!
February 19th, 2006 @ 3:46 pm
Congrats on your positive net worth.Don’t you fell empowered with that knowledge? Had friends do their net worth because they wanted to retire in 5 years at fifty. Discovered (?) they had a really hefty negative net worth. Now they hope they can retire at 65 with a postive net worth. Never seemed to understand that credit card debt had to pay off – or that those expensive 2-3 week vacations were not an investment.
February 19th, 2006 @ 5:47 pm
another fan of tracking networth on NetworthIQ here
it’s inspiring to see the line graph continually go up no matter where you start!
February 20th, 2006 @ 10:54 pm
Nicole, I’d love to hear your thoughts on NetworthIQ’s calculation of net worth as compared to the hundreds of others that are out there, and specifically vs. the one you linked to in your post. We (the Fourio guys) are really hoping that NetworthIQ makes taking that first step to determine where you are financially simpler, easier and less intimidating than most other personal finance sites out there. With savings rates across the U.S. at such low levels and debt loads so high, trying to spread some financial awareness has become one of our social responsibilities.
Anyway, great post and thanks!
February 21st, 2006 @ 9:00 pm
brilliant post. thanks so much 4 the courage 2 go & make it happen. u’ve inspired me!
February 22nd, 2006 @ 1:31 am
Amazing post! I have such a hard time computing my net worth since i’m going to be going into debt each year from law school. Since that’s my only debt, what I ought to do is just keep track of my assets as a form of motivation.
February 23rd, 2006 @ 1:52 pm
Hang in there. When I was your age (26), I had a zero net worth. Three years later, I was in the hole $25000 from law school debt. Now, at age 37, our net worth is $1.4M (in after-tax, mostly liquid or retirement assets, not real estate!) Granted, I married a woman who is a financial fast-tracker, but even without her contributions, my own earnings would have put my worth in the several hundreds of thousands. You can make it! So much changes in 10 years!
February 23rd, 2006 @ 9:39 pm
Nicole,
Awesome post. I never had the guts to calculate my net worth at 26, but I assure you it was negative. I’m only 32, but I have made a big turnaround. It didn’t take making a crap load more money, winning the lotto, or any other such nonsense. What it took more than anything was making the decision that I would not continue down that path.
I did begin to track my net worth while it was still negative. The period leading to Zero was very exciting. But more remarkable is how quickly it can climb once you are earning interest (and dividends and capital gains), rather than paying it.
March 1st, 2006 @ 8:17 pm
Nice post. For a little levity, if you go to this site: http://www.business-opportunities.biz/projects/how-much-is-your-blog-worth/ and put in your URL, you’ll find that you could be worth a lot more than you think. Exciting, huh?
March 13th, 2006 @ 11:24 pm
Nicole,
It’s good idea to look at your networth periodically say once a year. I do it when doing taxes. That way you can see the progress (hopefully) made that year.
Also, the way that I’ve found works best is to pay pay yourself first. By that I mean, have some amount of your check automatically transfered into an investment or savings account. If you don’t see it on your check it turns out it likely isn’t spent.
Good luck!
July 2nd, 2007 @ 6:05 am
Hi Nicole,
Like your blog.
I’m another fan of Net Worth IQ. Just found it and added it to my blog today.
We are also trying to get out of debt. Started in Feb. with $44,000!! We are making good progress though.
Good luck to you too!
April 3rd, 2008 @ 11:02 pm
my friend brandi is a whore
http://tinyurl.com/2mu4z5
November 4th, 2009 @ 5:41 pm
Hi,
The market is currently enjoying a good rally which has seen most stocks gain from competitive advantage and it would be advisable for all stock market enthusiasts to seize this opportunity and plan their investments in a safer yet conducive stock market. With NIFTY hovering around 4800-4900 +, it is expected to take hold of this currently rally and be realistically be closest to 5000 more so than before in what should be its new 52 week high.
Lot many untouched stocks are still there which are ready to blast any moment.
Regards
SHARETIPSINFO TEAM
November 4th, 2009 @ 5:42 pm
Hi,
The market is currently enjoying a good rally which has seen most stocks gain from competitive advantage and it would be advisable for all stock market enthusiasts to seize this opportunity and plan their investments in a safer yet conducive stock market. With NIFTY hovering around 4800-4900 +, it is expected to take hold of this currently rally and be realistically be closest to 5000 more so than before in what should be its new 52 week high.
Lot many untouched stocks are still there which are ready to blast any moment.
Regards
SHARETIPSINFO TEAM