Assets vs. Liabilities – Know your worth

This is it – the first day of the rest of your life, our first step together towards financial freedom. This isn’t going to be pretty and it may create some discomfort… but stick with me and we will be sipping on champagne on a yacht at the end of all of this.

The first step is knowing what you are worth.

You are priceless, you are a beautiful, gorgeous sunset… but let’s talk about your stuff.

Your net worth is the value of your stuff (assets) minus any money you owe (liabilities). Simple enough, right?

Kinda… but it can get messy… and complicated… and overwhelming.

Think about everything you have… and I am not talking about that totes adorable bag you got on sale… or the shoes that you classify as an “investment” (guilty!).

Here are the things you can qualify as Assets:

  • Cash
  • Checking Accounts
  • Savings Accounts
  • Retirement Account – 401(k) (US)
  • Retirement Account – IRA, Roth IRA (US) or other retirement accounts
  • Real Estate you own (the mortgage would go under “Liabilities” below)
  • Investment Portfolio (Stocks/Bonds/Mutual Funds/ETFs)
  • Vested Pension/Retirement Benefits (this may be through your employer and potentially dependent on your duration of employment)
  • If you own your own home, the value of that property
  • Equity in a business or property
  • Car (current value… NOT purchase price)

Some people include jewelry, clothing and other actual stuff in their list of assets – this seems like overkill to me. It also seems very unlikely that you would get your full investment back on that t-shirt you bought at Gap four years ago if you decided to sell it today… so let’s not include those types of things here.

Once you have a list of all the great stuff you have, start thinking about the yucky stuff… the money you owe, the credit card debt outstanding, the student loans accumulating interest since graduation, the mortgage you took out to buy that fancy ass mansion (baller)… bear with me… it will get better.

Here are the things that qualify as Liabilities (in their full amount – not just the monthly minimums):

  • All of your credit card balances (yes – every – single – one)
  • Each and every student loans
  • Outstanding car loan
  • Outstanding mortgage loan
  • Any personal loans

Once you have a total asset value and a total liability value, it is as simple as subtracting the Liabilities from the Assets – voilà! You have your net worth at that given moment.

Instead of sitting down with a pen, paper and phone (or calculator … if you live under a rock), I have put together a fun and friendly way to do this calculation as often (or as rarely) as your little heart desires. Don’t panic – it is an excel spreadsheet but I have spruced it up a smidge (as much as possible… it was a struggle). Click to download this Net Worth Calculator – because no one likes to actually do math…except the Enemy of Fun (barf).

My reaction when first calculating my net worth a year ago was to cry… a lot – it was a Friday night and the Enemy of Fun set up a “date” to “discuss my finances”… horrific.  So consider yourself spared from the horror of doing this as a fun not fun couples’ activity on a Friday night – unless you are into that sort of thing (you can’t sit with us).

But yes, I cried when I calculated my net worth – where was the fun number?! The magical pink unicorn number that meant I was a bazillionaire in travel, happiness and champagne? Harsh reality alert – that doesn’t exist. So chin up, buttercup – if you aren’t happy with your net worth (as I wasn’t), we can fix it! If you are happy – congratulations, I hate you… (kidding… kinda… go away).

How often should you do this net worth calculation? Let’s not get crazy about it… no need to rehash the same numbers every week. But it is a valuable way of checking in, re-evaluating your financial goals and seeing your progress. I do this every month or two… just to keep on top of it. If you are working with a budget (whole budget series to come… stay tuned), then you may not need to do this as frequently because you are keeping such close tabs on your moolah. Also, your net worth calculation is just a snapshot on that particular day of your financial situation – it doesn’t take into account the fact that you’re getting paid on Thursday or your rent for the month is due in two weeks.

Let’s get cracking, little kumquats! You are on your way to knowing your net worth and getting a bird’s eye view of your financial situation – and remember – this is your starting point. It is all uphill from here!  Download the fancy-shmancy Net Worth Calculator, make a list of assets and liabilities, check it twice, find out if you’re naughty or nice. (don’t feel bad – I was DEFINITELY naughty…)

Next up – what does it all mean!?!?!

Sincerely yours in harmonious fun and fiscal responsibility,


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