WHATS YOUR NET WORTH

Ever wondered exactly how much your net worth is?

What goes into calculating your exact net worth?

Well here it is in its entirety.

Your net worth is all your financial assets minus all your liabilities.

Your assets include any money you have sole or joint legal claim to.
Your bank accounts, all IRA's (401k, Roth, 403b's etc) whether company owned, or those you set up for yourself, stocks, bonds, or any other investments you can readily convert to cash.
 The value of your home-minus what you owe, is included.
 As is the value of your vehicle(s).  
The personal value of personal items are a little different as they are subject to the Scrooge rule.

The Scrooge rule means all your personal possessions are only "worth" what someone is willing to give you, in cash.
In other words, you may value that coin collection sitting in your closet as $2000 but if realistically the most you could ever get is at best $1,300, the coin collection is worth, according to the Scrooge rule, $1,300.
In terms of net worth the value of anything is only what someone will pay for it.

Now for the second part, it's even easier than the first.

The liabilities part. 
Your liabilities consist of all the money you owe. 
That really just it.
Your mortgage, student loans, credit cards, Auto loans, HELOC's or other bank owned debt.
Anything you owe to anyone is a financial liability.

Here are a few simple examples that best illustrate the point.

James and Donna have been married seventeen years.
 Their house is worth $250,000 but they still owe $80,000 on it.
Since they were married and brought the house they have added $60,000 in personal debt.
All combined they have outstanding debt of $140,000.
Now we list their total assets.
They have a combined $20,000 in various saving and checking accounts.
 They both have 401k's from work worth about $190,000.
Additionally they contribute regularly to an S&P 500 fund now worth $35,000. 
Personal possessions are worth (Scrooge rule enforced) $15,000. 
And again the home is worth, minus what they owe on it $170,000.
So now we take what they own ($430,000) and subtract what they owe  ($140,000).

James and Donna are worth $290,000.

Thirty-five year old Lucas is following a different path.
 One that leading him in the wrong direction.

He brought a house just two years ago for $285,00 and still owes $220,000.
 He has $65,000 in home equity.
Single Lucas owes an additional $95,000 on such items as auto loans, credit cards, medical bills, and money he's borrowed from friends and family just to get by some hard times.
His assets include $7,000 in his checking account. 
A truck worth $$17,000 minus a $7,000 note.
Finally he has about $55,000 in his 401k.
Again we take the total of his assets ($137,000) minus his liabilities (380,000).

Lucas's net worth is NEGATIVE $243,000. 
Don't be like Lucas.

Neither example has a shortage of room for improvement. 
But one is better than the other.
While Lucas has not ideally positioned himself financial, his situation isn't dire either.
 Not yet.
He (Lucas) still has decades to turn his situation around.
 Lots of people owe considerable amounts on their mortgages in their mid-thirties.
Other measures Lucas can take include paying off family and friends if only because we're talking about family and friends.
His current truck will have to last him far longer than he might like. 
He needs to immediately put himself on a budget.
This budget must aggressively address his debts and other obligations. 
It wouldn't hurt for him to start making some more money.
Lucas is a cautionary tale of what NOT to do.

And thats how we calculate net worth.
Everything we own minus everything we owe.