Net worth is simply assets minus liabilities — everything you own, minus everything you owe. It's the single clearest number for tracking financial progress over time, far more useful than income alone, since it captures debt paydown, savings, and investment growth all in one figure.
What counts as an asset
- Cash and bank accounts: checking, savings, money market accounts
- Investments: brokerage accounts, stocks, bonds, mutual funds
- Retirement accounts: 401(k), IRA, pension current value
- Real estate: current market value of your home or other property
- Vehicles: current resale value, not purchase price
- Other valuables: only if significant and easily sold (jewelry, collectibles) — skip everyday furniture and electronics, they add clutter without meaningful value
What counts as a liability
- Mortgage balance remaining on your home
- Auto loans remaining balance
- Student loans
- Credit card balances
- Personal loans or any other debt
A worked example
Here's a typical household net worth calculation:
- Checking + savings: $12,000
- Investment accounts: $35,000
- 401(k) balance: $68,000
- Home value: $380,000
- Car value: $14,000
- Total assets: $509,000
- Mortgage remaining: $245,000
- Car loan remaining: $9,000
- Credit card balance: $2,500
- Total liabilities: $256,500
Net worth: $509,000 − $256,500 = $252,500.
Why tracking the trend matters more than the number
A single net worth snapshot tells you where you stand, but tracking it quarterly or monthly tells you whether you're moving in the right direction. A 35-year-old with $50,000 in net worth growing by $15,000/year is on a much better trajectory than someone with $150,000 that's been flat for three years.
Common mistakes
- Using purchase price instead of current value for cars and homes — this inflates assets unrealistically
- Forgetting smaller debts like a 0% promotional credit card balance or a "buy now pay later" plan
- Counting illiquid items like furniture or clothing as meaningful assets — they rarely resell for real value
Calculate yours
Use the Net Worth Calculator to add up your own assets and liabilities and get an accurate snapshot in minutes.