What Should I Include in My Net Worth?

Your Net Worth is all of your Assets minus your Liabilities. In other words, all your money + equity – your debts. The Net Worth value is important to track, even if just once a quarter, to make sure you are building wealth. A doctor making $300k/yr could have a low Net Worth if they spend 99% of their income; whereas a teacher could have a higher Net Worth than that doctor if they save $10k over the year. Your Net Worth quantifies how well you are converting your income into wealth, as opposed to luxuries that have no value after they are used. For many, equity from the home they live in is a large chunk of their Net Worth. This isn’t bad, per se, but it means only a smaller portion of your Net Worth is being productive (i.e. earning interest).

Here is what to include in your Net Worth with examples:

Cash – The balances in your Savings + Checking accounts that aren’t already spent, Cash in a safe or safety deposit box (or under your mattress), savings in your HSA or FSA, money owed you that you realistically expect to receive soon, etc

Subtract Debt – Credit Card balances, auto loans, and other lines of credit

Investments – Retirement accounts (401k, 403b, 457b, 529, IRA, etc), investments in your HSA, brokerage accounts, Robin Hood, WeBull, peer-to-peer lending

Real Estate, minus any mortgages or loans – Take a fair appraisal and subtract your mortgage balance. Zillow may or may not give you a realistic value. You could compare estimates from Zillow, Redfin, and ReMax to get in the ballpark. Personally, since we have only owned our home for a few years and want to be conservative, we’re using the last official appraisal. Not required, but do be conservative and honest here. We also don’t update this value but maybe once a year or two as we want to see the organic growth of our Net Worth from frequent saving and investing, not frequent “artificial” increases from our home value jumping around.

Precious Metals – This shouldn’t be a huge chunk of your portfolio, but some is usually good. Gold and Silver aren’t the best investment nor even the best hedge against inflation, but it’s part of not keeping all your eggs in one basket. There are times when gold is worth it’s weight in, well… gold. For example, some Jews fleeing Nazi Germany sewed gold coins into their clothes knowing they could restart their lives elsewhere (rather than having German Marks in say Japan or Argentina).

? Vehicles – IF using conservative values and mostly offseting loans, in our opinion. To be honest, the only reason we included our vehicles’ value in our Net Worth is because Personal Capital automatically added the loans (update: when we had the loans, but they are paid off now). Because vehicles decrease in value each year and we only buy reasonable ones (currently <$10k) we actually need, we wouldn’t sell them unless we were destitute because they get us to and from work and family. When a car loan was in Personal Capital, we added a manual asset offsetting the loan. This manual asset was always less than the actual value of the vehicle. In our opinion, the Net Worth should be about growing your passive investments and overall wealth; not having expensive luxuries that decrease in value but look valuable on paper. Would you rather have $200k “equity” in a super car or $200k in a 401k? Unless your net worth is >$2-5 million depending on your other lifestyle choices, the 401k is the correct answer.