Recently, an individual contacted me asking how to calculate his net worth:

I am trying to calculate my net worth, and was wondering if you would share the formula for finding the % change between two values.

Calculating the change in your net worth over time is quite easy. Say you have an old net worth value and a new net worth value. The calculation for percent change is to subtract the old value from the new value, then divide that number by the old value. For example, let’s say you used to have a \$16,000 net worth and now you have a \$17,000 net worth. The percent change in your net worth is thus (\$17,000 – \$16,000) / \$16,000, or 6.25%.

Our friend had a much trickier question, though. He replied to me with the following:

This breaks down on negative numbers it looks like. Is there any easy way of seeing percentage gains when my net worth is negative?

First of all, having a negative net worth isn’t an unusual thing (see Make Love Not Debt, for example). It’s also not that bad of a thing as long as you recognize that it isn’t a good thing and are vigilant about improving your situation. Some people often do things to their net worth to make it appear negative (including not counting the value of their primary residence in their net worth calculation) so that they keep their eye on the ball.

With that being said, it is better to look at a negative net worth as a “net debt” because that’s what it is, in fact. When mine was negative, I usually had two ways of looking at my finances: I had a net worth of \$0 and a net debt of some amount, or I had a separate number for both my assets and my debt.

So, how do you calculate percent change in your “net debt” if you are in that situation? I would use the same formula as before. Let’s say you have a net worth of -\$16,000, but a month ago, your net worth was -\$17,000. The percent change in your net worth would then be (-\$16,000 – -\$17,000) / -\$16,000, or -6.25%. Remember, you want your net worth change to be negative if your net worth is negative. Why? A negative net worth is a “net debt,” and a negative percent change in debt means that your debt is going down.

Obviously, that period when you cross from a negative net worth to a positive net worth is even trickier, and is somewhat up to you.