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Ask Dave

How Do I Calculate My Net Worth?

In order to fill out a life insurance policy, Sheila needs to figure out her net worth. How does she do it?

QUESTION: Sheila wants to know how to figure her net worth in order to fill out a life insurance policy.

ANSWER: Assets minus liabilities equals net worth. What you own minus what you owe equals your net worth. If you own a home worth $200,000 and you owe $150,000 on it, you have $50,000 in equity toward your net worth. When you add up all the things that you own minus all the things that you owe, you get net worth.

Most of the time, when you’re filling out a life insurance policy, things like jewelry and furniture aren’t in the mix. Now, if you have a $30,000 Rolex, you might put that in there. But on the other hand, if the watch is a big part of your net worth, then you shouldn’t have bought the watch. We’re generally talking about bank accounts, investments, businesses and real estate that you own.