July 19, 2018
Do you know how much you're worth?
We keep score of so many things. But surprisingly, many people have never calculated their net worth. A net worth statement gives you an even bigger picture of your financial health than your income.
When I sit down with people to go over their budget, I start with their net worth statement. Some people concentrate on just their assets — their home, their savings or the value of their cars. Others fret just about their liabilities — credit card debt, student loans or mortgage.
But each part of your net worth statement tells an important story. And you won't know the ending unless you compare the two sides.
So what is net worth?
It's not complicated, although it may take you some time to gather all the information you'll need to determine your net worth statement. To calculate your net worth, add up the value of everything you own and subtract that dollar amount from everything you owe. In other words, your assets minus your liabilities equals your net worth.
For example, in listing your home, which for many is their largest asset, do some research to figure out the estimated fair market value of the property (asset) and deduct the amount you owe on your mortgage (liability). If the resulting number shows that your house is worth more than you owe, then you have equity, an asset, in the home.
To find out the current market value of your home, try Zillow or Realtor.com. For your car, there are a number of online resources — Consumer Reports, Edmunds and Kelley Blue Book — to help determine how much you could get for your vehicle.
Likewise, use eBay or other online consumer selling sites to figure out the value of household items. Based on the net worth statements I review, a lot of people overvalue their furniture and household goods.
Don't rush through figuring out your assets and liabilities, because you want to be as accurate as possible. This means facing all your debts and listing them all. Or facing the fact that you don't have a lot saved for retirement.
Knowing what you're worth will get you closer to achieving the wealth you want.
Try the online net worth calculator at Investopedia.com. I like this one because it's easy to navigate and you can personalize the information by adding specific assets and liabilities.
"Calculating your net worth helps you figure out where you are financially at this point in time," Investopedia says. "Expressed as a dollar amount, your net worth represents your financial health and is essentially the result of everything you have earned and spent up until now. While taking the time to calculate your net worth one time is helpful, what is really beneficial is to make this calculation on a regular basis so you can see trends in your overall financial health."
On your net worth statement, you want to see a positive number. I like to start with the net worth because often people's financial situation isn't as bad as they think. But sometimes it is, and seeing that negative number is the wake-up call they need. It's also helpful for people who have high salaries and think they're doing okay. They measure their financial success by what they earn. But if you're spending all your money accumulating assets that don't appreciate and racking up debt, you're not building true wealth. You can have a six-figure salary and still be broke.
Want know how your net worth compares to others in your age range? Read this: "Is Your Net Worth Better Than the Average American?"
If you complete your net worth statement and don't like what you see, take action. Maybe you need to save more or reduce your debt or both. Use what you find as an incentive to do better. Or, if you've got a great net worth, maybe it will help you stop worrying about whether you have enough.
Cheese. Cosmetics. Dog treats. Are those monthly subscription boxes actually saving you money and time?
In last week's personal finance newsletter, I asked: Do you have a monthly subscription box? And if so, how's it working out for you in terms of convenience and cost?
Scott Fossum from Houston wrote: "We had Blue Apron for two weeks and canceled, for a total of six meals for two people. We started it for the convenience of balanced meals. We cook 90 percent of our meals so are not unknown in the kitchen or cooking. The shortest preparation time was 45 minutes, and that was for sandwiches. The longest was 90 minutes. And the worst thing was after all that preparation time, the food was bland and not tasty. Newbies beware. Blue Apron bills you almost instantaneously for the second week when you sign up for the first week. So if you are only trying it out, come with a strategy to try your first box of meals while instantly suspending all deliveries until you are sure you want to continue."
"I had Blue Apron for a while," another reader wrote. "It was fun at first. It allowed me to try new ingredients, etc. But life intervened, and pretty soon I ended up not having time to cook and didn't use some ingredients, so I canceled. The other thing that concerned me about Blue Apron was the packaging and environmental impact of delivering these small boxes to people, sending the packaging back to be recycled, etc. No more subscriptions for me."
Emily Camfield of Madison, Wis., wrote: "We have several subscription boxes in our family. We get a Kiwi Crate (hands-on science and art projects) for the kids, and my daughter loves them! They are creative and well thought out (our first box was a spy kit, and the kids still play with the periscope and invisible-ink pens; last month was a rocket launcher). I also get a monthly box of quilting fabric from a shop called Pink Castle Fabrics ($25 a month), and I just signed the kids up for a monthly sticker club.
"I get them not to save money but because they are fun. I look forward to each one!"
Steve Brown of Bowie, Md., wrote: "I have subscribed to two: Birchbox, which gives me sample-size items of products I use anyway and allows me to try various brands without purchasing full-size items, and Ujamaa Box, which introduces me to goods made by and for people of color. Both well worth the investment."
Follow Michelle Singletary on Twitter @SingletaryM and Facebook.