How to calculate net worth

Net worth is a relatively quick and easy calculation to make, and it’s a valuable way to track your financial progress and see if you’re really getting ahead. So what is net worth and how do you work out your net worth?

What is net worth?

Net worth is an indicator of your financial health. Your net worth is the difference between what you own and what you owe. How much would you have in hand if you sold everything you had today and paid off all your debt?

Knowing exactly where you stand means you’re better equipped to make informed decisions to reach your financial goals. When you know you’re on the right track you can give yourself the space to enjoy life the way you want to – that might mean a classic car or a big overseas trip.

Building up your net worth means you have something to live off when you stop working. And if leaving a legacy to the kids is a priority, this is the number to keep an eye on.

How to work out your net worth

Use the Sorted personal net worth calculator to calculate your net worth – just plug in the numbers and sit back.

First, list all of your assets and their current values. That includes the balance in your bank accounts, any investments you have including KiwiSaver, your home or any property you own, and any other significant material possessions (for example, a car).

Figuring out the value of the ‘liquid’ assets like the money in your accounts is fairly easy, but with ‘fixed’ assets – items that would need to be sold in order to convert them to cash – you may need to take an educated guess at what they’re worth.

Next, list all of your debts. That includes student loans, credit cards, car loans, personal loans, hire purchase loans, mortgages, etc.

Subtract the amount of debt from the amount of assets, and voila! That’s your net worth.

If that number is greater than zero your net worth is ‘positive’ and it means you own more than you owe. If it’s less than zero your net worth is ‘negative’ and means your debts outweigh your assets.

How much should your net worth be?

Net worth generally increases with age as people build wealth over a lifetime. Often we start out with a negative net worth – student loans in particular can put us in the red, and in New Zealand they account for 70 percent of young people’s debt. On the other hand, older people have generally accumulated retirement savings over the years and often own a home outright.

According to Statistics NZ, the median New Zealand household net worth was $289,000 in 2014/15 and the median net worth of individuals was $87,000. (Fun fact: Graeme Hart, the richest New Zealander, clocks in at $7 billion; Bill Gates, the richest person in the world, is worth $75 billion.)

But let’s look at how this breaks down in more detail. We’ve put together an overview of New Zealanders’ average net worth by age, based on figures from Statistics NZ.

Median individual net worth (2016)

How to improve your net worth

Getting ahead financially means making moves to increase your net worth. That can mean paying off debt, or saving/investing more – or both! Use the Sorted debt calculator and savings calculator to see how to get ahead faster. 

When making any decision that involves money, it can help to step back and reflect on whether that choice will increase or decrease your overall net worth. Are you buying something without any lasting value, or something that will create and grow value for you in the long run? The best financial moves always boost your net worth.  

Finally, it’s worth reiterating: net worth and self-worth are different beasts.