Net worth is the difference between what you own and what you owe—it’s the clearest snapshot of your financial health. No matter your income or stage of life, knowing your net worth helps you see where you stand and what steps to take next.
It’s simple: add up the value of everything you own (like your home, car, savings, and investments), then subtract everything you owe (like your mortgage, credit card balances, and loans). For example, if your home is worth $250,000 and you still owe $200,000 on the mortgage, that part of your net worth is $50,000.
Tracking your net worth over time makes it easier to spot progress, set goals, and make smarter money decisions—so you can focus on growing, not just earning.
Key Takeaways
- Net worth represents the difference between total assets and liabilities, indicating an individual’s overall financial health.
- Positive net worth shows assets exceed liabilities, while negative net worth means liabilities surpass assets.
- Regularly tracking and managing net worth helps identify financial trends and areas needing improvement.
Why Net Worth Matters for Your Financial Health
Tracking your net worth is one of the easiest ways to see if your finances are moving in the right direction. It helps you spot how much debt you’re carrying compared to what you actually own, and whether you’re building real wealth over time.
Net worth isn’t just a number—it can affect your daily life. A strong net worth can open the door to better loan offers and lower interest rates, while a negative net worth might make it harder (or more expensive) to borrow money for things like credit cards, home equity loans, or personal loans.
Lenders, financial institutions, and even the Federal Reserve pay close attention to average net worth and median net worth as key economic indicators. While those figures offer a useful benchmark, your own net worth is personal—and shaped by your unique circumstances and goals.
Assets vs. Liabilities: What should you count?
To calculate your net worth, you need to know exactly what to include on both sides of the equation.
Assets
Assets are everything you own that has monetary value. Common examples include:
- Cash and Cash Equivalents: Money in checking and savings accounts, plus anything easily turned into cash, like money market funds. The cash value of some insurance policies fits here, too.
- Investment Accounts: Stocks, bonds, mutual funds, Bitcoin, retirement accounts like a 401(k) or individual retirement account (IRA)—use the current market value, not what you paid for them.
- Real Estate: The present market value of your home and any other property.
- Personal Property: Cars, jewelry, electronics, collectibles, and other valuable items.
- Business Ownership: Any interest you have in a business counts as an asset.
- Other Assets: Anything else with value, like antiques or rare collectibles.
Liabilities
Liabilities are what you owe. This includes:
- Credit Card Debt: Balances on all credit cards.
- Loans: Student loans, personal loans, home equity loans, car loans, and any other borrowed money.
- Mortgage: Any remaining balance on your home loan or other property loans.
- Outstanding Bills: Unpaid bills, such as utilities, medical bills, or back taxes.
- Other Liabilities: Any other debts, like unpaid taxes or money borrowed from friends and family.
If you sold all your assets and paid off everything you owe, the amount left is your net worth. Knowing exactly what to count helps you get an honest, up-to-date picture of your financial health.
How to Calculate Your Net Worth in 5 Simple Steps
Figuring out your net worth doesn’t have to be complicated. Here’s how you can do it in five easy steps:
Step 1: List All Your Assets
Start by writing down everything you own that has value. This includes cash, checking and savings accounts, retirement accounts, investment portfolios, your home, cars, and anything else you could sell for cash. Always use the current market value—not what you originally paid.
Step 2: List All Your Liabilities
Next, make a list of everything you owe. Include your mortgage, car loans, credit card balances, student loans, personal loans, and any other outstanding debts. Be thorough—missing a liability will throw off your total.
Step 3: Subtract Liabilities from Assets
Take your total assets and subtract your total liabilities. The result is your net worth. If the number is positive, you own more than you owe. If it’s negative, your debts are greater than your assets.
Step 4: Try a Net Worth Calculator
Want to make things even easier? Use an online net worth calculator. Just enter your numbers, and it’ll do the math for you. Many calculators are free and quick to use.
Step 5: Check Your Net Worth Regularly
Net worth isn’t a set-it-and-forget-it number. As your finances change—whether you pay down debt or your assets grow—your net worth will change, too. Try updating it every few months, or at least once a year, to keep tabs on your financial progress.
Net Worth Example
Seeing a real-life example makes the calculation much clearer. Here’s how it looks for a fictional person:
| Asset | Value |
|---|---|
| Home | $250,000 |
| Car | $15,000 |
| Savings Account | $5,000 |
| 401(k) | $40,000 |
| Total Assets | $310,000 |
| Liability | Amount |
|---|---|
| Mortgage | $200,000 |
| Car Loan | $7,000 |
| Credit Card Debt | $3,000 |
| Total Liabilities | $210,000 |
To calculate net worth, subtract total liabilities from total assets:
$310,000 (assets) – $210,000 (liabilities) = $100,000 net worth
This simple process gives you a snapshot of your financial health at a glance.
How to Track and Improve Your Net Worth
After you calculate your net worth, the next step is making sense of what it means—and deciding what to do about it. If your liabilities are higher than your assets, focus first on reducing debt. Start by tackling credit card balances and limiting new borrowing. Paying down student loans and car loans can also make a real difference over time.
Growing your assets is just as important, but it often takes a little longer. Make it a habit to add to your savings and investment accounts regularly, even if it’s a small amount. Over time, these steady contributions can add up and boost your net worth.
You don’t need to go it alone. A financial advisor can help you map out a plan, manage investments, and stay on track—even if you’re not a high net worth individual. The right advice now can set you up for bigger gains in the future.
Best Tools to Calculate and Track Your Net Worth
You don’t have to do everything by hand—there are plenty of tools that make tracking your net worth simple. Apps like Empower and Monarch let you link all your financial accounts so you can see your assets and debts in one place. They update automatically and give you a clear picture of your net worth at any time.
If you prefer something basic, a spreadsheet works, too. Just list your assets and liabilities and update them regularly. Many banks and brokerages also offer built-in net worth tracking tools.
The key is to pick a method you’ll actually use. Whether you go high-tech with an app or stick with a spreadsheet, tracking your net worth regularly helps you stay on top of your financial goals and spot trends early.
Simple Ways to Improve Your Net Worth
Boosting your net worth isn’t about making one big move—it’s about small steps that add up over time. Here are some proven strategies:
- Pay Down High-Interest Debt: Start with credit cards and personal loans, since they eat away at your net worth the fastest.
- Grow Your Savings: Set up automatic transfers to a savings account or emergency fund—even small amounts make a difference.
- Invest Regularly: Contribute to retirement accounts or brokerage accounts on a consistent basis to help your assets grow.
- Cut Unnecessary Expenses: Review your monthly bills and subscriptions, and trim what you don’t need.
- Increase Your Income: Pick up a side hustle, ask for a raise, or explore new job opportunities to add more cash to your bottom line.
Keep in mind, improving your net worth is a long game. Focus on steady progress, and you’ll see results over time—no matter your starting point.
Final Thoughts
Knowing your net worth is one of the smartest moves you can make for your financial future. It gives you a clear view of where you stand and helps you make decisions with confidence.
You don’t have to be a financial expert to track your net worth or make progress. Just get started, update your numbers regularly, and look for small ways to improve over time. Every step you take brings you closer to your goals.
Frequently Asked Questions
Can my net worth go up even if my income stays the same?
Yes, your net worth can increase even if your income doesn’t change. Paying down debt, watching your expenses, and letting your investments grow can all boost your net worth, no matter how much you earn.
Should I count joint assets or debts in my net worth calculation?
If you share assets or debts with a spouse or partner, you can include your share when calculating your personal net worth. Just be consistent in how you split and track these items.
How does home equity affect my net worth?
Home equity is the part of your home’s value you actually own—calculated as your home’s market value minus your mortgage balance. As your home increases in value or your mortgage goes down, your net worth gets a boost.
Is net worth the same as having cash on hand?
No, net worth is a big-picture number that includes everything you own and owe—not just the cash in your bank account. You might have a high net worth but still need to manage your day-to-day cash flow carefully.
