WalletPrep worksheet · Money basics
What is net worth and how do you calculate it?
Name ____________________ Date __________
Key ideas
- Net worth equals assets minus debts. Add up what you own, then subtract what you owe today. Priya's $19,300 of assets minus $34,000 of debts is −$14,700.
- Negative net worth is common early on. Student loans and car loans often outweigh savings in your 20s and 30s. The direction it moves matters more.
- Cars count at resale value, not price. Priya lists her car at what it would sell for today, $9,000, not the $14,000 she paid.
Vocabulary
- Net worth
- Everything you own minus everything you owe. It is a snapshot of your finances on one day.
- Assets
- Things you own that have money value, like cash, savings, retirement accounts, investments, a home or a car.
- Liabilities
- Debts you owe, like credit card balances, student loans, car loans, a mortgage or medical bills.
- 401(k)
- A retirement savings plan offered through an employer. Money comes straight from your paycheck, often with an employer match.
- IRA
- Individual retirement account: a tax-advantaged retirement account you open yourself at a bank or brokerage, separate from your job.
- Principal
- The amount you borrowed, or the part of your balance that is still owed, not counting interest.
Work it out
Priya, 27, is paying off student loans and a car loan. She lists every account on the first of the month.
- Checking and savings
- 401(k) balance
- Car, resale value
- Total assets
- Student loans
- Car loan
- Credit card
- Net worth today
- Change over one month
- Net worth one month later
Check yourself
You have $5,000 in savings, a car worth $8,000 and $15,000 in student loans. What is your net worth?
- A. $28,000
- B. $2,000
- C. −$2,000
- D. −$7,000
How should you value your car in a net worth statement?
- A. What you paid for it
- B. What it would sell for today
- C. What a new one costs
Which of these raises your net worth?
- A. Paying down a loan's principal
- B. Buying a new TV on a credit card
- C. Taking out a personal loan for a trip
- D. Adding a new store card balance
Your turn
Open a blank sheet and list every account you have, with today's balance. Total the assets, total the debts and subtract. Save the sheet and set a reminder for the same date next month.
Answer key
What is net worth and how do you calculate it?
Work it out
- Checking and savings$3,500
- 401(k) balance$6,800
- Car, resale value$9,000
- Total assets= $19,300
- Student loans− $24,500
- Car loan− $7,200
- Credit card− $2,300
- Net worth today= -$14,700
- Change over one month$840
- Net worth one month later= -$13,860
- Assets: $1,400 + $2,100 + $6,800 + $9,000 = $19,300, using what the car would sell for today.
- Debts: $24,500 + $7,200 + $2,300 = $34,000. Net worth is $19,300 − $34,000 = −$14,700, mostly student loans.
- A month later savings are up $300, debts are down $690 and the car lost $150. That is $840 better, so net worth is −$13,860.
Check yourself
- C. −$2,000 Assets are $5,000 + $8,000 = $13,000. $13,000 − $15,000 = −$2,000.
- B. What it would sell for today Net worth uses current values. A car loses value over time, so the resale value is the honest number.
- A. Paying down a loan's principal Paying principal lowers what you owe, which raises net worth. The other choices add debt.