This net worth calculator estimates an individual’s net worth by considering the assets owned such as cash, home, auto or investments & the liabilities owed such as mortgage, loans and similar debts. There is in depth information on this topic below the tool.
How does this net worth calculator work?
This personal net wealth calculator estimates the net worth of an individual, which represents his economic position seen as a difference between total assets (usually long term assets) and all liabilities owed.
The algorithm behind this net worth calculator requires these variables to be provided:
-
Assets owned which refer to all valuable properties of a person
- Fixed assets - Real estate
Home – its current market price.
Lands and similar properties – their value if sold today.
Other real estate – where applicable.
- Liquid assets - Cash
Savings accounts – no matter if it is a fixed account of current savings account.
Cash in hand – where the case.
Other cash in bank – no matter of their currency.
- Liquid assets – Investment portfolio
Retirement account – no matter of its type. Here can be included any type of account such as 401(k) savings account, IRAs, SEP IRAs or variable annuities.
Life insurance – which refers to the cash obtained from a life insurance contract.
Bonds – independent of their type: governmental, municipal or commercial bonds.
Mutual funds – if the case.
Stocks – any share portfolio held.
- Mobile assets – personal valuable objects
Auto and similar car vehicles.
Motorcycle and similar.
Jewelry and similar objects – including gold or any other precious metals or gems.
Other household objects – here can be included any valuable art objects.
- Liabilities owed (on a short, medium or long run)
- Long term debts
Home mortgage – refers to the principal left to be paid on the loan secured with your home.
Other mortgage – if the case this may include any other loans secured with a commercial property, land or property rented.
Short to medium term debts – may include business loans.
Personal loan – if the case the principal to be repaid.
Car loan – where applicable.
Credit card balance.
Student loan principal to be paid off.
Other debts if the case.
- Assumptions for the forecasted economic status
- Annual asset growth which is considered a fixed rate over the next 15 years. This is a relative measure of how quickly the assets owned by an individual grow year per year. It depends on the assets structure and the share of each component.
- Annual liability growth which is assumed as a constant rate over the next 15 years and refers to the relative change of the liabilities owed.
The formulas this tool is based on are:
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Personal net worth = Total assets owned – Total liabilities owed.
-
Total assets = Add all the items considered as assets.
-
Total liabilities = Sum all the figures as debts.
-
In case the assumptions for the future are given the net worth calculator returns a table with forecast of the net wealth over the next 15 years by applying this scheme:
|
Year |
Current Net Worth |
Total assets owned |
Total liabilities owed |
|
1 |
A1 |
B1 |
C1 |
|
2 |
A2 |
B2 |
C2 |
|
3 |
A3 |
B3 |
C3 |
|
… |
… |
… |
… |
|
n |
An |
Bn |
Cn |
Where:
A1 = Net worth for year 1 obtained by applying the standard formula
B1 = Total Assets owned for 1st year.
C1 = Total Liabilities owed for 1st year.
A2 = B2 – C2
B2 = (1 + Annual asset growth*0.01) * B1
C2 = (1 + Liabilities owed growth * 0.01) * C1
A3 = B3 – C3
B3 = (1 + Annual asset growth*0.01) * B2
C3 = (1 + Liabilities owed growth * 0.01) * C2
Understanding net worth
-
The higher than zero the net worth is the better for the individual in question;
-
If negative the net worth shows that on a long run the individual will not be able to pay in due time his debts and obligations.
Example of a calculation
Assuming this status for a person let’s figure out the net worth and its forecasted levels:
-
Assets owned
- Fixed assets - Real estate
Home = $150,000.
Lands and similar properties = $50,000
- Liquid assets - Cash
Savings accounts =$10,000
Cash in hand = $1,000
Other cash in bank = $2,000
- Liquid assets – Investment portfolio
Retirement account = $100,000
Stocks = $25,000
- Mobile assets – personal valuable objects
Auto = $10,000
Motorcycle = $4,000
Jewelry and similar objects = $2,500
Other household objects = $7,000
- Liabilities owed (on a short, medium or long run)
- Long term debts
Home mortgage = $100,000
Short to medium term debts = $10,000
Personal loan = $5,000
Car loan = $6,000
Credit card balance = $500
- Assumptions for the forecasted economic status
- Annual asset growth = 10%
- Annual liability growth = 5%
■ Current Net Worth = $250,000.00
The evolution over the next 15 years of your current net worth is presented below:
| Year | Current Net Worth | Total assets owned | Total liabilities owed |
|---|---|---|---|
| 1 | $250,000.00 | $361,500.00 | $111,500.00 |
| 2 | $280,575.00 | $397,650.00 | $117,075.00 |
| 3 | $314,486.25 | $437,415.00 | $122,928.75 |
| 4 | $352,081.31 | $481,156.50 | $129,075.19 |
| 5 | $393,743.20 | $529,272.15 | $135,528.95 |
| 6 | $439,893.97 | $582,199.37 | $142,305.39 |
| 7 | $490,998.64 | $640,419.30 | $149,420.66 |
| 8 | $547,569.53 | $704,461.23 | $156,891.70 |
| 9 | $610,171.07 | $774,907.35 | $164,736.28 |
| 10 | $679,424.99 | $852,398.09 | $172,973.10 |
| 11 | $756,016.15 | $937,637.90 | $181,621.75 |
| 12 | $840,698.85 | $1,031,401.69 | $190,702.84 |
| 13 | $934,303.88 | $1,134,541.86 | $200,237.98 |
| 14 | $1,037,746.16 | $1,247,996.04 | $210,249.88 |
| 15 | $1,152,033.28 | $1,372,795.65 | $220,762.37 |