What Are You Worth? Determine Your Personal Owner’s Equity
Ever wondered what you are worth in financial terms? It’s called owner’s equity and this post will give you the tools to find out what your personal owner’s equity is.
What is Owner’s Equity?
The official definition is as follows: Owner’s Equity is the total assets of an entity minus its total liabilities. In layman’s terms, it is the difference between everything you own that has value and any debt you owe.
Step 1: Determine Your Assets
Let’s start by figuring out the total value of all of your assets. This includes things like bank accounts, car(s), real estate, savings, brokerage accounts, and any valuable items. I’ll use my personal information at the time of writing this as an example.
|Checking Account #1||$18,269.76|
|Checking Account #2||$1,725.86|
|General Savings Account||$1,725.86|
|Wealth Builder Account||$2,035|
|Health Savings Account (HSA)||$484.60|
|Car (Kelly Blue Book Value)||$8,747|
|Guitars and Amps||~$2,000|
|Furniture and Appliances||~$3,000|
|Total Asset Value||$231,782.84|
As you can see, there are many things of monetary value that I can claim ownership to. The easiest of these to determine are my bank account values as they are recorded to the penny. For the harder things I had to approximate their worth as if I were to sell them.
Step 2: Determine Your Liabilities
The next step is to figure out how much you owe against your assets. This includes things like student loans, credit card debt, mortgages, car loans, etc. Again taking my liabilities as an example, even though I only really have one:
Step 3: Find the Difference
Simply subtract the total liabilities from your total assets and you will see how much money you would have if you liquidated everything you own. So, my net-worth is $117,782.84.
What Use is This Information?
Finding out your personal owner’s equity allows you to begin to track trends on your overall wealth. So, if you spend a little time calculating your net-worth each month you can see whether that trend is increasing, decreasing, or remaining constant. If you find that your trend has been on the decline then you know some hard changes might be required to improve your financial well-being.
Another thing this information allows you to do is to acquire better interest rates on future loans. If you can provide proof that you are financially stable and in the green then you are more likely to get better loan value.
There is one caveat with finding out your net-worth. While this information is helpful, it might lead you to feel prideful or even feel bad about yourself. However, don’t let it have that kind of influence as it is only a snapshot of your financial performance and will change over time. Remember, your personal worth is more than just a dollar sign.