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Figuring the Net Worth
Dear Dave, I’m in the middle of filling out an application for life insurance, and they are asking me for my net worth. Is there a formula for figuring this out? Sheila Dear Sheila, Assets minus liabilities equal net worth. That’s the fancy way of saying it. The easiest way to think of it is this: what you own, minus what you owe, equals your net worth. Let’s say your home is worth $200,000. If you owe $150,000 on it, you have $50,000 in equity to apply toward your net worth. You want to be careful not to significantly overstate or understate your net worth. Generally, things like furniture and everyday jewelry aren’t part of the calculation. Now, if you’ve got a $30,000 Rolex strapped to your wrist, that’s different. On the other hand, if a watch like that is a big part of your net worth, you probably shouldn’t have bought it the first place! Things like bank accounts, investments, and maybe businesses or real estate are the kinds of things that usually show up on a net worth statement. – Dave
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Today's date: March 15, 2010
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