How does your net worth stack up?

Walter Updegrave is a senior editor with Money Magazine and is the author of "How to Retire Rich in a Totally Changed World: Why You're Not in Kansas Anymore" (Three Rivers Press 2005).

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NEW YORK (Money) -- Question: Where can I see how my net worth compares to that of other people my age? --Luke, Fort Worth, Texas

Answer: I believe it's a good idea for virtually everyone to calculate his or her net worth periodically. After all, net worth -- which is what's left over after you subtract what you owe (debts and liabilities) from what you own (your assets) -- is the single most comprehensive gauge of your financial health. Think of it as the financial version of your vital signs, your pulse, temperature, blood pressure and respiratory rate all rolled into one.

But calculating your net worth can be especially useful during volatile economic times like those we're experiencing today.

One reason is that doing so can give you an idea of just how much of a margin of safety you have against financial setbacks. That's useful information in an iffy economy like this one when you've got to be particularly careful about deciding how much you can afford to spend, how much you should save and how you ought to invest.

Beyond that, the process that you go through to arrive at your net worth -- gathering statements for your saving and investment accounts, home mortgage and other loans, determining the value of your house, etc. -- can often alert you to weak spots in your finances.

If you're nearing retirement age, for example, and your net worth has taken a big hit because the value of your 401(k) and your house have simultaneously swooned, that could be a sign that you need to seriously re-evaluate your investing strategy (and probably re-assess your retirement planning overall).

Or you may be surprised to the extent to which you've let borrowing get out of hand over the years. Seeing all your loan balances listed in one place may give you just the incentive you need to start paring them.

Fortunately, calculating your net worth isn't very difficult. Once you've gotten your financial info together, you can go to an online calculator like our net worth worksheet, plug in your figures and, voila! Your assets, liabilities and net worth -- essentially your version of a corporate balance sheet -- will be laid out right in front of you.

In reality, that figure isn't quite as precise as it seems. Some assets may be hard to value. For example, you can get a decent idea of what your home might sell for by checking with a local real estate agent or going to sites like Zillow, Trulia and Cyberhomes.com. But that's just an estimate of what it might fetch in this market.

Similarly, it's important to keep in mind that your net worth is a snapshot of your financial condition at one point in time. In fact, it will vary as you repay debts and your assets gain or lose value.

Which brings us to what I think is the most important reason to calculate your net worth in the first place -- namely, by tracking your net worth from year to year, you can see whether you are making progress toward greater financial security.

There may be periods when your net worth will decline because of developments beyond your control in the economy and stock market (witness the past year). But, ideally, as you earn more, save more and then invest those savings, your net worth should rise over the course of your career. If that's not happening, you need to ask yourself whether you ought to make a change, such as saving more diligently and investing more prudently.

As for comparing your net worth to other people's, I understand the attraction of this exercise, but I'm not sure how meaningful it is, given that even people of the same age, income and occupation can be in very different financial situations. I see net worth more as a tool for gauging your own progress than measuring yourself against others.

That said, if you want to engage in this exercise, you have a few options. For a general idea of what the averages are for your age group and income level, you can use our net worth comparison calculator.

For the most recent trends in net worth, you can check out the Federal Reserve's quarterly "Flow of Funds" report, the latest of which was released on June 11. I warn you. This baby's a monster, 124 pages of densely packed stats. But here you'll get a small section of the report that begins with Table B.100, which contains household net worth stats from 2002 up to the first quarter of this year. It's not pretty. As a result of the recession and market crash, total household net worth in the U.S. was down to $50.4 trillion at the end of the first quarter, a 20% drop from its level at the end of 2007.

But this report shows net worth only in aggregate. For a more detailed look, you've got to go to another Fed Report, the Survey of Consumer Finances. If you go to Table 4 on page 11, you'll find net worth figures broken down by age, income, race, education, occupation and a few other variables.

The rub, however, is that this survey is done only once every three years, with the most recent being 2007. So as you peruse the figures, remember, they were compiled before the current downturn.

You can really let the money voyeur in you run wild by going to NetworthIQ, a site where people post their actual net worth (or what they say their net worth is) as well as other information about themselves. These posts are then organized by categories such as income, education and occupation.

One final note: as long as you're going to the trouble to calculate your net worth, why not see how your finances shape up in more specific areas as well?

You can do just that by checking out my recent column on resources such as our Financial health tool, Asset Allocator and Debt Reduction Planner that can help you give yourself a financial check-up.

Who knows, if you take the time to put in a session or two with these or other tools in our Calculators section, you could end up with a nice bump in the size of your net worth down the road.