How much are you worth? Most people have no idea. People like to quote the market value of their house and "forget" that it is mortgaged. Or they quote their salary, when they think of how much they are worth, confusing net worth with income streams. (Any income stream such as salary is considered to be cash flow, rather than net worth).
Your net worth is the measure of what you own after taking account all your obligations, and is calculated by this formula: Assets minus Liabilities = Net Worth. It's what's yours alone at the end of the day, after all your debts have been subtracted.
Assets are everything you own. To work this out, get a sheet of paper and list the market value of all your assets: your house, your pension schemes, your stocks and shares, your insurance policies, your cash savings, the value of bonds you own, the value of your jewelery, the market value of your car, the market value of consumer durables (such as LCD TVs, mobile phones, iPods etc), the value of any marketable collections (such as stamp collections, paintings, art). When you've finished, total the list and this gives you the value of your assets.
Liabilities are everything you owe, in other words, all your debts. To work this out, list on a clean sheet of paper all your debts: your mortgage, your credit card balance, your student loans, other loans including loans from parents and friends that you must pay back. When you've finished, total the list and this gives you the amount of your liabilities.
Now subtract the liabilities from the assets to get your Net Worth.
It is at this point that people get a shock and realize they are worth less than they thought. Some people even have a negative net worth, especially those who have been hit by falling house prices in a recession. But at least you now know where you stand and can take steps to improve your situation.
The quickest way to increase your net worth is to reduce your liabilities. If the value of your assets stands still, but you pay off your debts, your net worth will increase. Take action today, and you will have taken concrete steps to increasing your net worth.