Read Adulting 101 free: the opening pages

A free sample of Adulting 101: Financial Freedom for Gen Z & Young Millennials. About 10 minutes of reading.

Understanding Your Financial Landscape: The Brutal Truth

Calculating Your Net Worth: The Big Picture

Let’s be real. You’re probably not thinking about your “net worth” while scrolling TikTok or deciding between ramen and takeout. But ignoring the big picture won’t make your money problems magically disappear. Knowing where you actually stand financially is the first step to getting control. It's not about being rich right now; it's about knowing where you are so you can build the future you want.

Your net worth is simply what you own minus what you owe. Sounds basic, right? It is. But surprisingly few people actually calculate it. This isn’t about judgment; it’s about information. Think of it like checking your weight if you’re trying to get in shape. You need a starting point.

Why Bother with Net Worth?

Knowing your net worth gives you a clear snapshot of your financial health. It’s a baseline. Are you moving in the right direction? Are your efforts actually making a difference? It also helps you prioritize. Seeing the numbers can be a serious wake-up call, in a good way. It highlights what’s working, what’s not, and where you need to focus.

Step 1: List Your Assets (What You Own)

Assets are things that have value and can be turned into cash. Here’s a breakdown of common assets:

Cash: Checking accounts, savings accounts, money market accounts.
Investments: Stocks, bonds, mutual funds, ETFs, cryptocurrency (be honest with yourself about the current value!), retirement accounts (401k, IRA, Roth IRA).
Real Estate: If you own a home, condo, or other property, list its current market value (not what you originally paid).
Personal Property: This is trickier. Cars, jewelry, collectibles, anything you could realistically sell. Be conservative with these estimates. Don't inflate the value.
Side Hustle Assets: If you have equipment or inventory for a side business, include its value.

Action step: Download our Net Worth Tracker template [link to downloadable template]. It's a simple spreadsheet to help you organize everything.

Step 2: List Your Liabilities (What You Owe)

Liabilities are your debts. Everything you owe to someone else.

Student Loans: Federal and private loans. Use the current outstanding balance.
Car Loan: The remaining amount you owe on your vehicle.
Credit Card Debt: Total balance across all cards.
Personal Loans: Any loans you’ve taken out for other purposes.
Mortgage: If you own a home, the remaining balance on your mortgage.

Step 3: Calculate Your Net Worth

Now for the math. Don’t panic. It’s easy.

Net Worth = Total Assets, Total Liabilities

If the result is positive, congrats! You have more assets than debts. If it’s negative, that’s okay too. Many people starting out have negative net worth, especially with student loans. It just means you have some work to do.

Example: Meet Sarah

Let’s look at Sarah, a 24-year-old recent college grad.

Assets:

Checking Account: $1,500
Savings Account: $3,000
401k (from part-time job): $2,000
Car (estimated value): $12,000
Total Assets: $18,500

Liabilities:

Student Loans: $35,000
Car Loan: $8,000
Credit Card Debt: $1,500
Total Liabilities: $44,500

Sarah’s Net Worth: $18,500 - $44,500 = -$26,000

Sarah’s net worth is negative. This isn’t ideal, but it’s a realistic starting point for many young adults. The important thing is she knows this, and can start making a plan to improve it.

Using the Net Worth Tracker

Our template simplifies this process. Here’s how to use it:

Create a Tab for Each Category: Assets, Liabilities, and Net Worth.
List Each Item: In the appropriate category, list each asset and liability with its value.
Use Formulas: The Net Worth tab automatically calculates your net worth by subtracting total liabilities from total assets.
Update Regularly: Aim to update your net worth monthly or quarterly to track your progress.

Pro tip: Be consistent with your valuations. For example, always use the current market value of your car, not what you originally paid.

What’s a “Good” Net Worth?

There’s no magic number. It depends on your age, income, and location. But here's a rough guide (these are very general and can vary greatly):

Age Range	Net Worth Goal
18-25	Close to $0 (or slightly positive)
26-30	1-2x Annual Income
31-35	2-3x Annual Income

Don’t get hung up on these numbers. Focus on your progress. Are you consistently increasing your net worth over time? That’s what matters.

Common Mistakes to Avoid

Overestimating Assets: Be realistic about the value of your possessions.
Underestimating Liabilities: Don’t forget about small debts or outstanding bills.
Ignoring Retirement Accounts: Include the current value of your 401k, IRA, etc.
Not Updating Regularly: Your net worth is a snapshot in time. It needs to be updated to be useful.
Getting Discouraged: If your net worth is negative, don't give up. It's a starting point, not a final destination.

Warning: Don't compare your net worth to others. Everyone’s financial situation is unique. Focus on your own journey and progress.

Beyond the Number: What Your Net Worth Tells You

Your net worth isn’t just a number. It’s a story. It tells you about your financial habits, your priorities, and your potential.

High Net Worth, Low Income: You may have accumulated assets (inheritance, investments) but need to focus on increasing your income.
Low Net Worth, High Income: You may be spending too much or taking on too much debt. Focus on budgeting and debt reduction.
Stagnant Net Worth: You may need to re-evaluate your financial strategy. Are you making progress towards your goals?

Example: If Sarah consistently updates her net worth tracker and sees that her debt is decreasing while her savings are increasing, she knows she’s on the right track. If her net worth plateaus, she needs to identify the problem and adjust her strategy.

Tracking Your Progress: The Monthly/Quarterly Check-In

Calculating your net worth is just the first step. You need to track it over time to see if your efforts are paying off.

Monthly Check-In (Quick): A quick review of your assets and liabilities to ensure everything is up-to-date.
Quarterly Check-In (Detailed): A more thorough review, including updating valuations and analyzing your progress.

Action step: Schedule a recurring reminder in your calendar to update your net worth monthly or quarterly. Treat it like any other important appointment.

Checklist: Calculating Your Net Worth

Gather statements for all your accounts (checking, savings, investments, loans).
Estimate the value of your personal property.
List all your assets in the Net Worth Tracker template.
List all your liabilities in the Net Worth Tracker template.
Calculate your net worth using the formula: Total Assets, Total Liabilities.
Schedule a recurring reminder to update your net worth monthly/quarterly.

You've taken the first, and arguably hardest, step. You now know where you stand. This isn’t about feeling bad about your current situation. It’s about empowering yourself with knowledge so you can build the financial future you deserve. Now, let’s get into understanding exactly where your money is going.

Let's Work Through an Example: Meet Alex

Alex is a 24-year-old recent college graduate working as a graphic designer. Let’s break down how Alex might calculate their net worth.

Assets:

Checking Account: $1,500
Savings Account: $3,000 (emergency fund)
Investment Account (Roth IRA): $2,000 (started contributing recently)
Car: $8,000 (current market value, check Kelley Blue Book or similar)
Personal Property: $1,000 (electronics, furniture, clothes, a rough estimate)

Total Assets: $15,500

Liabilities:

Student Loans: $30,000
Car Loan: $12,000
Credit Card Debt: $800

Total Liabilities: $42,800

Net Worth: $15,500 (Assets) - $42,800 (Liabilities) = -$27,300

Alex’s net worth is negative, which is very common for someone just starting out with student loan debt. Don’t panic! It simply means Alex owes more than they own right now. The important thing is Alex knows this, and can start working towards improving it.

Analyzing Alex’s Situation:

Alex has a good start with an emergency fund and a Roth IRA, which is fantastic. The biggest drag on their net worth is the student loan and car loan debt. Alex's focus should be on strategically paying down debt while continuing to build savings and investments.

Downloading Your Net Worth Tracker

To make this process even easier, we've created a downloadable Net Worth Tracker template. It's a simple spreadsheet where you can list your assets and liabilities, and it automatically calculates your net worth.

[Download the Net Worth Tracker Template Here: link to a simple Google Sheet or Excel template]

The template is designed to be user-friendly. Feel free to customize it to fit your specific needs. Add or remove categories as necessary. The key is to have a central place to track your financial progress.

Diving Deeper: Asset Categories

Let's break down the different types of assets you might include:

Cash & Equivalents: Checking accounts, savings accounts, money market accounts. These are your most liquid assets.
Investments: Stocks, bonds, mutual funds, ETFs, cryptocurrency, real estate (if you own property). These assets have the potential for growth but also carry risk.
Retirement Accounts: 401(k), IRA, Roth IRA. These are long-term investments designed for retirement.
Personal Property: Car, furniture, electronics, jewelry, collectibles. These assets have value but may depreciate over time. Be realistic with your estimations.
Real Estate: If you own a home or other property, include its current market value minus any outstanding mortgage balance.

Understanding Your Liabilities

Liabilities are what you owe to others. Here's a breakdown:

Student Loans: Federal and private student loans.
Car Loans: The amount you still owe on your vehicle.
Credit Card Debt: Outstanding balances on your credit cards.
Mortgage: The amount you owe on your home (if applicable).
Personal Loans: Any loans you've taken out for personal expenses.

The Importance of Accurate Valuations

While calculating your net worth is straightforward, getting accurate valuations for your assets can be tricky. Here are a few tips:

Cash & Investments: Use the current balance shown on your account statements.
Car: Use a reputable online valuation tool like Kelley Blue Book or Edmunds.
Personal Property: Be realistic. You likely won’t get what you paid for used items.
Real Estate: Get a professional appraisal or use online tools to estimate the current market value.

What if Your Assets are Illiquid?

Sometimes, you have assets that aren’t easily converted to cash, like a piece of land or a vintage collection. While you should include these in your net worth calculation, remember that their value is only realized when you actually sell them.

Net Worth vs. Cash Flow: They're Different!

It's easy to confuse net worth with cash flow.

Net Worth is a snapshot of your assets and liabilities at a specific point in time. It’s about what you own.
Cash Flow is the money coming in and going out of your accounts over a period of time (usually a month). It’s about how you manage your money.

You can have a positive net worth but still struggle with cash flow, or vice versa. Both are important, but net worth provides a broader picture of your financial health.

Troubleshooting Common Issues

I don't know the exact value of everything: Don't get hung up on perfection. Estimates are okay, especially for personal property.
My net worth is negative and I'm discouraged: Remember, this is a starting point. Focus on making small, consistent improvements.
I'm overwhelmed by the process: Break it down into smaller steps. Start with your most liquid assets and liabilities.
My financial situation is complicated: Consider consulting with a financial advisor (fee-only, if possible) for personalized guidance.

Beyond the Baseline: Using Your Net Worth to Set Goals

Once you know your starting point, you can set realistic financial goals. For example:

Short-Term (1-2 years): Pay off a credit card, build a larger emergency fund.
Medium-Term (3-5 years): Pay off a car loan, increase investment contributions.
Long-Term (5+ years): Pay off student loans, save for a down payment on a house, build a comfortable retirement fund.

Track your net worth regularly to monitor your progress and stay motivated. Celebrate your wins, and adjust your strategy as needed.

Remember, building financial security is a marathon, not a sprint. It requires consistent effort, discipline, and a willingness to learn. You've already taken a huge step by calculating your net worth. Keep going, and you’ll be well on your way to achieving your financial goals.

The sample ends here.