It may look like a simple task, but it's actually not, given the amount of inflation and the relativity paradox that is complicating it. First of all your Net Worth is the number that shows how much wealth you have in total, after all taxes, debts, and other variables are discounted. It's basically how much money you have in absolute total.

Now there are probably predefined ways how to calculate this, but I don't go with those, because they are mainstream Keynesian methods, which are severely flawed because they don't take into account inflation, money supply, and currency movements. So I have my own method to calculate this.

Also the number by itself is meaningless, you either have to compare it to other people's Net Worth, in order to estimate yourself in the social ranking ladder, or compare it to your last year's Net Worth, to know how much profit you have really made.

There is also the relativity paradox, since every monetary relationship is subjective (basically I'm a subjectivist either way). But you need an "objective" value, and the objective value will be simply an aggregation of subjective values. The object is simply just a collection of subjects, if you understand what I mean.

Read more about this whole paradox and philosophy here:

• https://steemit.com/philosophy/@profitgenerator/secrets-of-the-universe-part-2

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Calculating It

It is important to know exactly how much money you have, down to the penny, in order to be a successful person. And whatever costs are not precise, we will just estimate it, to give us a view.

Now let's take for example a fictional Johny who is a middle-class guy with the following assets and liabilities in the end of 2015:

• A house with current bid price of: 54,631$ which he bought for 25,000$ and 800$ legal fees ,and a tax on selling it of 15%.
• A car with current bid price of: 9162$ which he bought for 10,000$ and 300$ legal fees, and a tax on selling it of 15%
• 62000$ in a savings account yielding 0.90% yearly after tax
• 50 Bitcoin which he bought at 620.3$ in June 2014, 50% income tax
• A business loan of 200,000$ which he pays 4.5% interest on it yearly with 3% of the capital,
• A business worth 320,512$ with a yearly revenue of 10% of the worth and a fixed expenses of 8,531$ not including the debt payment, and a total business tax of 40%
• A net salary at his own business of 5100$/month
• Johny also likes to spend 70% of his total profits, except those of his business,which he reinvests it into the business, while putting the rest of it in his saving account.

In 2016

• His house price appreciated to: 60,561$
• His car depreciated to: 8,621$
• He put his personal profits in his savings account and interest remained the same
• Bitcoin price rose to 946$
• He paid his business loan chunk with interest
• His business is successful making the same profits
• His salary remained the same

The question is now, how much money did Johny have in total in the end of 2015, and how much he has at the end of 2016. Did he make money or lose money?

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• First of all we establish a baseline, and a base currency to serve as a reference. We will choose the USD since it's the reserve currency, and it's easy to work with. He already got paid in USD so that is easy to calculate, but it can be done in other currencies too.
• Then we need to calculate the inflation of the USD, and the USD's relative value to other currencies, to see if the base itself has moved.
• Then and only then we begin to calculate Johnny's stats.

Dollar Index

Since the USD is the reserve currency, all commodities are calculated for the USD, therefore we don't need to calculate Gold or Oil prices. However we need to calculate the relative value of the USD toward other currencies, and the Dollar Index is the best for this: https://www.investing.com/indices/usdollar-historical-data
Jan 2015: 90.27
Jan 2016: 98.63
Therefore we have a 9.261105572% increase

Dollar Inflation

The Dollar is also inflating, but I don't look at the CPI data, because that is useless, instead I look at the M1 supply change, because that is what affects prices:
http://www.federalreserve.gov/releases/h6/Current
Jan 2015: 2,937.3 (not adjusting for seasonality, obviously)
Jan 2016: 3,093.8 (not adjusting for seasonality, obviously)
That is an inflation of 5.328022333%

So the USD in that 1 year period has created a return of 3.933083239%

Johny in 2016

• The house: 54631−25000 = 29631 - 15% - 800$ legal fees = 24386.35 + 25000 original investment = 49386.35$ Asset (because if he were to sell it, he would only get this much for it, fuckin taxes :D )
• The car: 9162$ - 300$ = 8862$ (no tax because it's a loss)
• Savings: 62,558$
• Bitcoin (263.19$ in 2015) = 13,159.5$ (massive loss)
• Business ( loan 200,000$) paying down 7.5%, a cost of 15,000$, together with the other fixed costs 8,531$, that is a total cost of 23,531$. The revenue is as always 32,051.2$ now (10% of the total value), so the gross profit is 8,520.2$, minus a 40% tax, that is 5,112.12$ out of this venue. But he reinvests it, so his business is worth now 325,624.12$
• Johny also paid himself (some of the fixed costs of the business) a net 5100$ monthly, but he spends 70% of his salary. So he has another 18,360$ yearly that goes into the piggy-bank.

TOTAL = 49386.35 + 8862 + 62558 + 13159.5 + 325624.12 + 18360 = 477,949.97 $ NET WORTH IN 2015

Johny in 2017

• The house: 60,561-25,000 = 35,561 - 15% = 30,226.85$ - 800$ legal fees + 25000 = 54,426.85$ Asset
• The car: 8,621 - 300$ fees = 8,321$
• Savings: 62,558$ + 18,360$ + 0.90% =81,646.262$
• BTC (946$ at the end): 50 * 946 - 620.3 * 50 = 16,285 - 50% tax + 620.3 * 50 = 39,157.5$ (profit of 8,142.5$ instead of loss)
• Business (194,000$ loan) paying down 7.5%, a cost of 14,550$, together with the other fixed costs 8,531$, that is a total cost of 23,081$. The revenue is 10% of 325,624.12$, is 32,562.412$. So you have 32,562.412- 23,081 = 9481.412$ - 40% tax = 5,688.8472$. He reinvests it again, so his business is worth: 331,312.9672$
• Johny also paid himself (some of the fixed costs of the business) a net 5100$ monthly, but he spends 70% of his salary. So he has another 18,360$ yearly that goes into the piggy-bank.

TOTAL = 54,426.85 + 8,321+ 81,646.262 + 39,157.5 + 331,312.9672 + 18,360= 533,224.5792 $ NET WORTH IN 2015

Therefore his raw Net Worth has increased: 11.564936221%

And his Inflation adjusted Net Worth has increased by: 15.49801946%

So indeed Johny is a successful businessman, and made good money in that 1 year. This is how we calculate a Net Worth of an individual.

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Upvote, ReSteem &