So you've heard the term 'net worth' being thrown around lately as a way to figure out what your financial position currently is, and when you finally got curious enough to do the calculation, you realized it was in the negatives!
Don't be scared off from calculating your net worth again, because it is an important financial figure to keep at the back of your mind at all times, even if it isn't quite so rosy at the moment. Why? Because it's actually normal not to have a positive net worth as a student. As a student, you have (or had) little or no income for quite a while, yet you're presumably spending a lot on tuition, books, food and other living expenses. If you have no income coming in, but only expenses going out, it isn't a surprise that you not only don't have any money, but your net worth is far into the negatives.
According to an article published by pbs.org, the average student debt load upon graduation was about $26,600, in 2011. You can pretty much expect your net worth to be about -$26,600 or less (taking into account your living expenses for four years) when you leave college.
However, even though it is in the negatives, knowing your net worth number is important because you need to know how much debt you are accumulating while in college, which will determine how much you'll need to save from your future income to pay it off in a reasonable amount of time. Today, you are spending the future income you are expecting to make once you graduate. The less student debt you take on, the less time it'll take to clear it when you graduate, and you won't feel chained to it for years to come.
Right now, when you calculate your net worth, you may end up realizing that you are actually taking on more debt each year than you are comfortable having. In that case, you'll want to create a budget and immediately cut back on expenses to stop sliding deeper into debt.
In addition, you may also decide that it's a good idea to pick up a part-time job to make some more income to cover your current expenses. Knowing your net worth also helps you figure out how you're doing financially from year to year. Once you get into the habit of calculating your net worth, you will not only know how much debt you are accumulating each year but also how long it could potentially take to make your net worth become positive.
You could run a few scenarios with future expected income (less taxes, of course), create a preliminary budget for when you start working, and create a financial plan for while you are in college and for after you graduate.
The Bottom Line
The bottom line is not to be scared of your negative net worth as a student. Student debt is an investment you have chosen to make in your future by getting a college degree, with the money you are expecting to earn when it comes time to graduate.
When you look at it in that light, calculating your net worth on at least a yearly, if not monthly, basis will help keep your spending in check and let you see if you simply need to make more money. By doing so, it will allow you to feel in control of your financial future if you are able to build a financial plan on how to get out of debt as quickly as possible, rather than scrambling to do it in the midst of adjusting to a new job and life after graduation.
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