Jan 09, 2017 10:43 AM EST

How And Why You Should Compute Your Net Worth

H & R Bails Out Last Minute Filers
Mike Johnson (L), gets help with his taxes from tax specialist Deliana Jarquin, April 14, 2004 at H&R Block in Coral Gables, Florida. With only one day to go before the April 15th deadline to file taxes, accountants around the U.S. are swamped with last minute filers.
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Jimmy Fallon, Serena Williams and Kylie Jenner are some of the trending names today when you search for celebrity net worth. While theirs reflect how wealthy they are, probably mainly thanks to their current career in the show business, why should an ordinary people also care for his or her own net worth?

Lee Schafer of StarTribune makes a case that it is important for a regular people to start looking at his household wealth. For one, knowing your net worth gives something definite to measure as you try to save money for your future.

But first, what is net worth? Investopedia defines net worth as the amount of your assets minus your liabilities. So your net worth becomes higher when your assets grow, and it can be lower when you owed more.

Knowing what you have is your starting point in setting how much you want to have, say for example, for your retirement. It is also important to track your progress. If your net worth is increasing, then you have a healthy financial status. Meanwhile, if your net worth is losing value, then it signifies a problem at some point of your finances. Keeping tab of your wealth can help you pin down where the issues are and work on the solutions from there, per MainStreet.

There are available online tools that can be used to calculate your net worth, like this one from Bankrate.com. But still, it also helps that one knows how to compute it manually. Using an Excel spreadsheet or an actual piece of paper, set one column for your assets and another column for the liabilities.

Assets include your home, car, investment stocks, bonds, cash, 401(k), appliances, and even your clothes. Zillow would be a helpful site to get an estimate of how much your house would cost in the market while you could check out Kelley Blue Book for the value of your car.

Liabilities include the principal amount of your mortgages, auto loans, student loans, credit card debt and anything else that you owed to other people.

When you've listed everything, add the assets column. Also add the liabilities column. Subtract the total liabilities from the total assets, and you got your net worth. From there, you can study the areas that you need to focus on, as well as financial habits that you need to ditch or develop.

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