While we should never measure our sense of personal value by the things we own or how much money we have in the bank, knowing our personal and household net worth can contribute to our overall sense of well-being and help us make decisions about the future. Still, many people haven’t really taken the time to calculate their net worth, so they may not be optimizing their ability to reach their financial goals.
What is net worth?
Basically, net worth is a calculation based on the value of assets an individual or company has amassed minus the amount of debt incurred. Your personal net worth includes any liabilities such as credit cards, student loans, car loans, etc, plus your personal assets, including things like personal savings, RRSPs, stocks, and bonds. Your household net worth is based on the same calculation including your partner’s assets and liabilities. Other household assets or debts may include real estate and any co-owned investments. Some families also include their children’s RESPs in their net worth calculation until their beneficiaries access the funds. Personal possessions like clothing, cars or household items are not typically included in net worth calculations, however.
Why should we track net worth?
Knowing your net worth can help guide you as you make goals for the future. By charting your net worth regularly, you can also ensure that you are on track to meeting those goals. Calculating household net worth is also a crucial piece of creating a written plan that can help give you and your family a concrete picture of your financial wellbeing and provide a roadmap for where you’d like to go.
Calculating Your Net Worth
Figuring out your net worth can be done using a simple spreadsheet, but there are also a number of online templates and calculators that can make the task quick and easy. Templates and net worth calculators are especially useful because they will prompt you to include all of the necessary information. Sun Life offers one that also creates graphs that can help you visualize your financial situation and gives feedback on the average net worth of other families based on the province you live in and your age group.
It’s important to remember that negative net worth is not necessarily a bad thing in and of itself, especially for young families that may still have student debt and other loans. However, a worthy long-term financial goal is to move consistently toward a positive net worth.