How to calculate total assets and net worth – what do you include?

Knowing your net worth is an absolutely vital step in reaching your aim of early retirement. In fact its vital even if you aren’t looking to retire early. This is no different to any aim we have in life. What would you do if you were planning on running a marathon in personal best time? You would start training. But not just random training. You would be tracking your times, tracking your fitness. First you would have your target, your target time. But then you would know if everything you were doing was actually helping you towards that goal. If your 10k runs were getting slower then maybe that double kebab on Friday nights isn’t helping after all!  And so when we consider how to calculate total assets, and our net worth we want to make sure we are tracking and know

And yet so many people have no idea what their net worth is. A Hargreaves Lansdown report showed that 75% of people under the age of 45 don’t know the value of their investment. In other words at best only 1 in 4 people under the age of 45 know their net worth. Is this because people don’t care about net worth? Clearly not if you check out google, there are lots of searches about net worth. But…

… virtually all of the searches are for celebrities of varying quality. Across the world people are tapping into prophet google ‘remy ma net worth’, ‘gucci mane net worth’, ‘denzel washington net worth, and of course ‘JB* net worth’

So people do care about net worth. But only the net worth of people who are rich already. Only about people that they will almost certainly never meet.

Hopefully you’re still with me and haven’t been distracted by voraciously googling the net worth of every minor celebrity you know. If so, let’s quickly make sure we know what net worth is, and why it is important.

* JB is he who shall not be named on this website. ‘He who shall not be named on this website’s name rhymes with Dustbin Gleeber.

What does net worth mean and why is it important?

How to calculate total assets - know what you own
If you total assets = one rubber duck, you have a long way to go…

Quite simply net worth means what am I worth now. What is the sum total of everything I own now, less everything I owe now. So we need to know how to calculate total assets (what we own), and total liabilities (what we owe) Here’s a quick example (sorry for those of you I’m teaching to suck eggs)

  • If I had no assets to my name other than a £1 rubber duck,
  • but had debts of £3,000 that I had racked up on my credit card living it large eating out at KFC every day for year,
  • Then my net worth would by -£2,999.

Ouch! Not a great start to financial independence! But don’t worry. Even if you are starting out your journey with a net worth lower worth than a penny sweet the important thing to realise is that you can turn this around.

The reason our Net Worth is so important when it comes to wanting to retire should be obvious. It shows us everything of financial value that we own that we could potentially use to live off in our retirement. But not all assets are created equal, or as easily accessible as each other. And so there can be debate about exactly what constitutes your net worth.

So what should you include in your net worth calculation?

Well… It depends what you wan’t to include! That sounds bizarre. Surely there is just one measure that everyone uses? In short, no there isn’t. Different people have different views on what should or shouldn’t be included. And that’s fine. How to calculate total assets can mean different things for different people.

As we go through this article you will see why people might decide to include different measures. The first important thing for you to decide is what will you include. And then stick to it. You want to have one consistent measure.

Secondly you need to know why you are tracking your net worth.

Is your sole focus that when you reach a certain age you will have financial freedom? If so then you might just want to focus on those investments that will directly support you when you retire.

Do you also want to know what your inheritance might be? If so then you’ll probably want to make sure you can pass your assets on tax efficiently. In this instance you’ll be much more interested in your total net worth. In everything in your estate.

Let’s look through some of the assets you might want to include in your net worth. We’ll start at the ones you’re most likely to include and then work our way through the list.

1. Cash

Cash - liquid net worth
The good old days when we stored cash in strong chests.

Aaah who doesn’t love cold hard cash. Smelling it, touching it. Sadly since the advent of banks we don’t need to store our cash in well protected chests any more.

But cash is great because it’s so accessible, and you know exactly what it’s value is. If you have $500 in you current account. You can get your hands on $500 pretty much immediately.

Pretty much everyone will include the cash they hold in their net worth calculation.

Cash comes at the top of our list because it is what many people call a liquid asset. This simply means something that can be converted into cash in a short time, with little or no loss in value.

2. Investment savings – liquid

The term liquid asset is thought to have derived from a mistranslation of the ancient Mayan civilisation’s hieroglyphics. Some of the notations appeared to show that liquid was prized more highly than gold, and even the king. However it later became apparent that Chad Bucklow, an American jock, had etched the liquid hieroglyph to while away a boring college trip. But by then, the term liquid asset was in daily usage.

Next up on the list are those savings you have in stocks and shares, or similar investments such as bonds. These aren’t quite as easy to lay your hands on as cash but not far off. Even if you have a plan to leave them untouched for ten years you could probably access them in a couple of days. You might have to pay a fee, or there value might drop just before you access them. But you can turn shares into cash relatively easily and quickly – so it also a liquid asset.

Your investments will form a key part of your investment strategy for early retirement. So you will want to include these in your net worth calculation.

3. Defined Contribution Pension Savings

The access you have to these savings really depend on how old you are. Or how much of tax hit you are willing to take. In the UK you can access savings in pension from the age of 55 (increasing to 57 in the near future) with no tax hit. In the US you should also be able to access savings in in a 401(k) pension vehicle from the age of 55 with no tax hit. Take advice though on this please.

So… once you reached those ages your pension savings are very accessible and liquid. But before then they are not so accessible because you will pay a hefty tax charge to access whatever you have ferreted away.

Now things start to get a little but blurry. You will want to include these in your net worth.

But also to be very aware that until you reach your earliest retirement age you won’t be able to get access without taking a big hit.

If you are looking to retire after this date then this is not a problem. However if you are looking to retire earlier, you will need to make sure your other assets or income can sustain you until you can start to draw on your pension pot.

I group my assets into two headings to make it easy for me to make the distinction,

  • Current liquid assets = Cash + Investments
  • Pension liquid asset = Cash + Investments + Pension contribution fund

The pension liquid assets is one of my key metrics to check on a monthly basis. This is where I’m focusing most of my monthly savings, and it will be vital in supporting me in my retirement.

4. Defined Benefit Pension Savings

Now we start to get to those assets that some people might decide not include in their net worth. Or they may include them but value them very differently to the next person.

With a defined benefit pension you get a guaranteed monthly income on retirement rather than adding to a hopefully growing pension pot. Many people won’t include this as they never intend to cash-out this pension. In other words they will never realise the full value of the asset in one go. They’ll just draw down on it year by year in retirement. This is fine, and will lead to a lower required net worth in retirement using this method.

The downside of not including it of course is that you could have a large value locked up in the scheme. Indeed many people are being offered an attractive lump sum to be removed from the defined benefit. I would tread very carefully here, a pension scheme won’t offer to buy you out unless they think it is worth it for them.

There are lots of different options on how to value you defined benefit pensions, but we’ll look at that in our next post.

5. Your state pension

Another asset that you could well be building up over time is the state pension. In the UK if you make ten qualifying years then you will start to earn the state pension. So you could argue that you should add this up to earning the maximum of 35 years. Personally I don’t include it. When I die this is basically worth nothing – and there’s no way to cash it out either.

6. Property

Your property is an asset and should be in your net worth calculationNow we are moving to much less liquid assets. It can take months or years to sell some properties so it isn’t readily available to help in times of a downturn in your fortunes.

Some people exclude property equity on the basis that it is their home and they are not looking to sell it. Therefore when looking to retirement options it could skew the picture.

I think it should be included as property does represent an asset that gives you options come retirement, or before. Many people might downsize their property when they retire to release some of the built up equity. It is also useful if you are paying a chunk of your spend each month on a mortgage to understand what element is you boosting your assets vs just paying off interest.

When valuing your property it is normal practice to reduce the value by any mortgages outstanding. To be more specific, don’t include it as an outstanding debt further on in our calculation of net worth. Reduce the value of the property. This is because any mortgage will be secured against the property. If you try to sell the property, you will have to repay the mortgage.

7. Other assets

Other assets you might include in your net worth
If you couldn’t bear to sell your Mongolian teddy bear collection – don’t include it in your net worth

We’re possible starting to scrape the barrel a little more now, but you may have some other assets that are actually worth something. This is where I could include my £1 rubber duck mentioned earlier!

You would be more likely to add these assets to your net worth if you have items you are holding for this very purpose. If you have a selection of classic cars you are repairing before hoping to sell for a profit, then sure it makes sense to add them.

For myself, I don’t really have much value in other assets. And I have know desire to hunt through the house working out how much on eBay I could get for selling all the stuff we’ve accumulated.

One reason many people don’t include other assets in their net worth is that it can be difficult to get an accurate value of what they are worth. And will you really be willing to sell your prized collection of teddy bears from Outer Mongolia?

Pareto’s 80:20 rule kicks in here. It’s probably not worth the effort for most people to work out the value here, as it won’t have any material impact on your net worth.

But, if you have a swanky car collection – by all means include it.

8. Your business

If you own a business then there is almost certainly a value to it.

Particularly if it makes a profit and is easily transferable to someone else. If you plan on selling your business when you retire then you will certainly want to include it in your net worth.

But if it’s a family business you will hand down, then probably not. You are more of a custodian of the business, even if you do legally own it all. Intent is very important when deciding whether you should include your business in your net worth.

Once you’ve worked out the value of your business you may find it becomes a central plank in your retirement plans. There can be a lot of value to others in purchasing an up and running businesses.

9. Inheritance expected

If you want happiness for a year, inherit a fortune. If you want happiness for a lifetime, help someone else.


You really shouldn’t include any inheritance you might have been promised or are expecting in your net worth. Until you receive an inheritance, it isn’t yours. People might change their mind. Or their circumstances might change and the pot they expected to be able to hare out has dwindled.

I’d be pretty put out if I found out one of my children’s whole plan for retirement was based on me dying in 5 years time. I mean seriously!?! Obviously the jokes on them though. I have a ten year plan to retirement so they’ll never get enough in 5 years! Suckers!

Debts to include in your net worth

So we have an idea now how to calculate total assets, but what about net assets?

The next part of working out our net worth will sadly see it reduce. For some of us it might even go negative. This is particularly true for younger people.

1. Secured debts

Any debts which are secured against an asset (like a mortgage) will need to be deducted. You can remove these when you put in the value of an asset. Or you can show the asset value in full and then show the full debt separately. Same difference.

2. Credit cards & store cards

Credit card debt reduces your net worth
Unless you pay off your cards in full every month, you’ll need to deduct your credit card debts. You’ll be looking to pay these off as soon as possible as they tend to have higher rates than you will ever achieve investing money.

3. Student loans and debts

Many students will leave university with a pile of debt. The hope is of course that higher future earnings will more than offset the cost. But for now, you’ll need to remove these from your net worth. In the UK you don’t start paying back your loan unless you reach a certain salary level. So many students never pay it back in full.

Nonetheless until you reach the point the loan is written off, include it’s value in full.

4. Other loans & debts

If you owe tax, or have other loans you’ll need to remove these from your net worth too. You should be pretty aware of what these are as you are likely to receive statements. If you are self employed you’ll may also need to consider if you owe any taxes.

5. Loan sharks

loan sharks impact your net worth
using loan sharks = bad idea

Please don’t have anything in this section!

Sharks = cool.
Loan sharks = not cool.

Sharks = instrumental in creating the classic film jaws.
Loan sharks = instrumental in bringing misery to mankind.

Summary – How to calculate total assets and net worth

As you can see there are a lot of things to consider when working out how to calculate total assets, and what to include in our net worth. A big part of how to calculate total assets and net worth is to decide what you will track.

The first key rule is consistency. Decide what you will include or not. And then stick to it. This will allow you to see trends over time.

The second key rule is to know the purpose of why you are tracking your net worth. Do you only care about achieving financial independence? And you don’t care about any inheritance you might leave? Then you may not include as many things as someone ho really acts to leave a legacy for others.

In the next article we will look at how we can actually work out our net worth.  This will be the second part in our mini-series looking at how to calculate total assets and net worth.


Any information provided is not personal advice. You are responsible for your investment decisions and all tools provided are for illustrative purposes only. If you’re not sure whether an investment is right for you, contact a financial adviser. All investments can fall as well as rise in value, so you could get back less than you put in. Please remember, past performance is not a guide to future returns and that income is variable, not guaranteed.

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