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A “net worth” does not just apply to a random celebrity you decide to Google.

We’ve all been there before. You are watching Home Alone on TV, and you wonder to yourself how much Macaulay Culkin can possibly be worth today. So you type “Kevin McCallister Net Worth” into Google, and a number is conveniently thrown back at you.

It is almost less of an amount of money and more of a “welfare check” (no pun intended) to see if that person is okay. High net worth - Macauly has made some great investments and is living a reasonable life. Low net worth - another child's soul lost to Hollywood.

Believe it or not, former child actors aren’t the only people with a net worth. You have one, too, and it is relatively easy to calculate. Let’s see if you have a higher net worth than Corey Feldman and how this number applies to you.

Casting the Net

Breaking it down to its basic principles, net worth equals your assets minus your liabilities.

Your assets are everything you own, like money, real estate, and other valuable items.

Your liabilities are the value of everything you owe, like loans, credit card balances, and other debts.

Make An Asset Out Of Yourself

I know you love your Spice Girls CD collection, but is that considered an asset? I’ll tell you what I want, what I really, really want - no, it is not.

Items that can be considered assets are:

• Liquid Assets - Cash money

• Investments - Stocks, bonds, and retirement accounts

• Real Estate - Home, vacation properties, land

• Cars and other motorized vehicles - Tangible assets or anything with a resale value.

• Art/Jewelry and other items with significant resale value

If you ask me, LEGO should also be on this list since it can appreciate higher than gold over time (we honestly can’t go a newsletter without mentioning gold), but that’s just an excuse to justify my expensive hobby.

Living a Liability

Liabilities are the reason you drink Pepto Bismol with a straw. This is the money you somehow spent without having it and directly limits the value of your assets when calculating your overall net worth.

Common liabilities people have are:

• Credit Cards

• Student Loans

• Car Loans

• Personal Loans

• Mortgage

• Unpaid bills/invoices

• Your tab from the local bar in college

Now that you know the basic arithmetic behind calculating your net worth, the most challenging part will be staying organized and tracking it consistently.

The first thing you should do is list all your assets and liabilities. Consolidate your investments in one place and consider the value of all your tangible assets and valuables properly. In addition, you need to account for all debts, including your mortgage. The goal is to create a full list of everything.

Next, you need to update and track it consistently. Any time you make a large purchase, ensure you log the value of that item or investment and any debt potentially owed on it.

What gets measured gets managed.

Imagine you were on Shark Tank pitching for someone to invest in you. What’s the first thing they’re going to ask you for? Your numbers. They won't invest in you if you don’t know your numbers.

You should know your net worth, liabilities, and what you can spend a month. This is foundational to personal finance, and you can’t be successful without taking care of this first.

If you want to get your finances in order, this is your next-most urgent task.

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Average Net Worth By Decade

Caught in the Net

The average net worth of Americans is $1,063,700.

Although net worth varies by age group, the goal should always be to minimize liabilities and increase assets.

As you age and acquire assets like real estate, stocks, and business equity, your net worth should naturally increase as you have more working capital to pay off debt.

Although the average net worth might seem high, the median net worth was a much more reasonable $192,900. 

This means that if you put every American's net worth in order from greatest to least, the amount directly in the middle would be just under $200k.

Widen Your Net

We mentioned how your net worth naturally increases with age, just like your belt size, but there are things you can do to increase your net worth. Paying off debt and acquiring new assets and investments is a way to do this quickly.

Some strategies to pay off debt are the “snowballing method” and the “stacking method”.

To use the snowballing method, you must do the following:

• List all your debts in order from smallest to highest dollar amount.

• Use any extra money to pay off the smallest debts while maintaining minimum payment on the others.

• Continue paying off the smallest debts until you are ready to tackle your largest ones.

Although this method gives you the thrill and enjoyment of paying off a debt, you pay more through interest.

Using the stacking method, paying off debt from the highest interest rate to the lowest makes the most financial sense.

Debt interest is an enemy to us all, the money terrorist. Over our lifetime, we pay 34% of the money we make in interest. I hope you didn’t just toss up your morning Wheaties after reading that.

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Why Does It Matter?

Your net worth is like putting a timestamp on your finances.

Knowing your net worth can give you insights into your money habits and how they align with your future goals.

A firm grasp of your net worth can help you budget better and plan for the future. It can even tell you when you might be able to retire.

Retired of It All

My mom is part of the record-setting number of Baby Boomers who retired this year and are responsible for wiping out Social Security. Every day, she can’t help but rant and rave about how much she loves retirement as she plays Pickleball and does karaoke in her 55 and older community. Clearly, retirement is a purely magical experience we should all want as soon as possible.

If you have a good idea of how much you spend every year and the lifestyle you want in retirement, you know how much you need to save to support your retirement. 

If you know your net worth, you can determine how much to save and then stop working for good.

Take Control

Paying off debt is the financial equivalent of waking up early to go for a run and eating vegetables. It is no fun, and all you want to do is take yourself out to eat, which is a lousy decision both health-wise AND for your wallet.

Knowing your net worth and accurately tracking it is like forcing yourself to get on the scale every morning. Yeah, running is boring and painful, and broccoli might taste like farts, but it all feels worth it to know that there is less of you standing on the scale today than there was the day before. That you’re healthier.

Not to mention that watching your net worth grow will be deeply satisfying. You work hard; you deserve it.

”Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones.”

— Benjamin Franklin

Our Favorite Money Tools

🦋 Monarch - Automatically monitor spending, create budgets, and track your net worth. Categorizes transactions with AI.

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🥧 M1 Finance - Simple, no-fee investing with superpowers. Built from the ground up for long-term investors with high expectations. We use them; they are awesome.

🏠 Fundrise - Invest in Rust Belt and Mid-Western real estate.

🏦 Mercury - The best small business checking account, full stop. We use it for all of our businesses, including my personal checking.

🌵 Lasso - My business. We create tools that help Creators monetize their work.

See the complete list in our Toolbox.

Money Talks

What contributes most to your net worth, or what reduces it the most?

Let us know your answers so we can feature them in a future newsletter!

May the cash flow always be in your favor,

Andrew and Lou - the Funny Money team