Home › Guides › Net Worth Explained
WealthA person earning $200,000 with $250,000 in debt is poorer than someone earning $60,000 with no debt and $100,000 saved. Income is a flow; net worth is the stock — everything you own minus everything you owe. It's the single number that captures your whole financial picture.
Try it yourself: Set a target and project how savings grow it over time. Savings Goal Calculator →
The formula
Net worth = Assets − Liabilities
— everything you own, minus everything you owe —
— everything you own, minus everything you owe —
Assets (use current market value, not purchase price): cash, savings, investments, retirement accounts, home equity (market value), cars at resale value, valuable property. Liabilities: mortgage balance, student loans, car loans, credit card balances, personal loans, any other debt.
A worked example
| Assets | Liabilities | ||
|---|---|---|---|
| Savings | $8,000 | Mortgage | $220,000 |
| Investments | $25,000 | Student loans | $18,000 |
| Retirement accounts | $45,000 | Car loan | $9,000 |
| Home (market value) | $280,000 | Credit cards | $2,500 |
| Total assets | $358,000 | Total liabilities | $249,500 |
Net worth = $358,000 − $249,500 = $108,500. Note the home contributes equity of $60,000 ($280k − $220k) — include it, but remember it's illiquid.
Three ways to grow it
Only three forces move net worth, and every financial decision is some combination of them:
- Increase assets: save and invest consistently — the main engine for most people.
- Decrease liabilities: pay down debt — each dollar repaid is a dollar of net worth created.
- Avoid destroying both: high-interest debt and depreciating financed purchases work both levers against you at once.
Track it monthly or quarterly. The trend over years is what matters: a rising line means your savings rate exceeds your spending and debt growth — the whole game, in one chart.
Common mistakes
- Counting gross assets only. A $280k home with a $270k mortgage is $10k of net worth, not $280k.
- Using purchase prices. Your car's sticker price isn't its value — use resale value.
- Ignoring it. People track their weight but not their wealth. The number you measure is the number you manage.
Frequently asked questions
List everything you own (cash, investments, property, retirement accounts, valuables) at current market value, then subtract everything you owe (mortgages, loans, credit card balances). Net worth = assets − liabilities. Use realistic values, not purchase prices — what it would sell for today.
Yes for a complete picture — count the home's market value as an asset and the mortgage as a liability. Just remember home equity is illiquid: it helps your net worth but not your cash flow. Some people track both total net worth and "liquid net worth" (excluding the home) for this reason.
Absolutely — it just means you owe more than you own, which is common early in careers with student loans or a new mortgage. What matters is the direction: a rising net worth (even from negative) means your finances are improving. Income alone tells you nothing; net worth tells you everything.
Monthly or quarterly is ideal — often enough to see the trend, rarely enough to avoid reacting to market noise. The trend over years is what matters: steady upward movement means your savings rate exceeds your spending and debt growth.
Disclaimer: Calculator content is for education and planning only — not financial advice. Loan terms, rates, fees and tax rules vary by lender and country; confirm important figures with your lender or a licensed financial adviser before deciding.