Net Worth – How Much You Have Saved and How Far You Have to Go

Calculating your net worth sounds scary but is actually easy and will make a lot of other personal finance calculations and decisions much easier. First, knowing it will give you some credibility and confidence. Second, your net worth is one number that will tell you exactly where you are financially. You need to know where you are in order to make a plan to get to your goal (financial freedom, retirement, you name it).

For me it is the goal-oriented portion of my brain that really clicked with keeping track. Well before I started earning an income I knew I wanted to buy a home. Put aside the financial decision it is a lifestyle decision I knew I wanted. This made a perfect net worth goal – 30% for a down payment by age 30 excluding my RRSP.

Having this specific and tangible goal made it much easier for me to further cut my budget. Regularly calculating my net worth also gave me a regular reality check or pat on the back.

Your Net Worth = All Your Assets – All Your Liabilities

Keep track of your net worth

  1. Make a list of every financial account you have (bank, lenders, credit cards, investments, etc.)
  2. Add all your assets and subtract all your debts
  3. Repeat regularly (I record mine semi-annually and check it quarterly)

Don’t forget to include all your assets:

Chequing account
Investments
High interest savings accounts
TFSA
RRSP
The blue book value of your car
The value of your home**
Retirement funds**

Don’t forget to include all your liabilities:

Car loan
Student loans
Credit card loans
Line of Credit
Money you owe family or friends
Mortgage**

** I consider out home and my retirement funds as long-term and illiquid assets. I calculated I calculate my net worth with and without them.

If you have figured out what your net worth is and want to keep reading:

The Fraser Institute discusses the wealth gap by age in Canada – and really drive it home with a great graph.

The Huffington Post published an interesting article about the increasing net worth of Canadians – specifically related to rising home prices

Knowing that people just need a number the Globe and Mail obliged with a chart. Remember, it is just a guideline.

Now that you have your starting point use it to start planning your retirement.

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