Corporations know it as a Balance Sheet. This would be your own Personal Balance Sheet. Basically, it gives you an overview of your total value on paper.

To arrive at your own net worth, you only need a piece of paper and a pencil. If you want to get really fancy, you can use an Excel spreadsheet on your computer. Create two (2) columns: one labeled Assets and one labeled Passive. Under each column, you’ll list the name of each asset and liability along with the dollar amount.

Assets

For the asset column, list all the assets you own. This is anything that has any monetary value. The full value of your home would be included on this side. That is, if you were to sell that house today, how much money would you expect to sell it for? If it were to sell for $300,000, you would put the following in the asset column:

House…$300,000

Other items that might be included in assets would be cash in the bank, cash on hand, investments, IRAs, 401k’s, certificates of deposit, money market accounts, Treasuries, stocks, car value, jewelry, special collections (such as coins , stamps, works of art). Basically, anything you own that might be worth money goes on the Assets side of the worksheet.

Passive

Liabilities are just the opposite of assets. They are all the elements that are not owned by you. It’s anything you owe money for. They are your debts. Similar to the Assets side of the worksheet, you want to list each of your liabilities. Don’t worry about monthly payments or interest rates in this worksheet. Just write down the total cost it would take to pay off that liability and get out of debt.

For example, in that $300,000 home asset example above, let’s say you still owe $200,000 on a mortgage. So $200,000 in cash would be needed to pay for it. Then, in his liabilities column, he would write:

Mortgage…$200,000

Other items to include in your liabilities column are: credit cards, school loans, mortgages, car loans, home equity, lines of credit, any furniture or electronics you still owe money on, and money borrowed from friends and relatives.

Total it up

1) Finally, you want to calculate your net worth. To do this, add up all the dollar amounts in your Assets column to get a grand total of everything you own.

2) Then add up all the dollar amounts in your Liabilities column to get a grand total of everything you owe.

3) Finally, subtract the amounts from the grand total. So subtract your Liabilities from your Assets.

Net Worth = Assets – Liabilities

This number, your net worth, is the dollar amount you are worth, on paper. We say on paper, because unless you sold all of your assets, you really wouldn’t know exactly what you would get for them. So it’s an estimate. But it should be a very close to accurate estimate. Hopefully, your number is greater than 0, which means you actually have some wealth or net worth. If it’s zero, then you’re at breakeven. If it’s a negative number, then that’s the worst case, where you have no wealth. Or negative net worth. What you owe is more than what you have.

You can use this worksheet to track your progress as you clear the debt. Do this exercise every year to recalculate your net worth. It should always be increasing if things are going well. And if you’re erasing debt, then you should see a positive jump in your net worth every year. It becomes a tool to track your progress. And it’s a good indicator of how healthy you are financially.

So get going, create your net worth spreadsheet, erase debttrack your progress and build wealth.