The basic formula
Net worth = what you own (assets) minus what you owe (liabilities). It's a single number that summarizes your financial position at a moment in time. That's it — no mystery.
net worth = total assets − total liabilities
What counts as an asset
- Cash, checking, and savings accounts
- Taxable investments (brokerage)
- Retirement accounts (401(k), IRA, pension)
- Home equity (home value minus mortgage)
- Vehicles (use realistic resale value, not purchase price)
- Other valuables you could realistically sell
What counts as a liability
- Mortgage balance
- Student and auto loans
- Credit card balances
- Personal loans and medical debt
- Any other money owed (back taxes, BNPL balances, etc.)
Worked example
If assets total $480,000 and debts total $310,000, net worth is $170,000. Break it down further and you might find most of that is home equity — meaning the number looks healthy but liquidity is low. That's why a single net-worth number, while useful, doesn't tell the whole story.
Total net worth vs. liquid net worth
These two numbers measure different things:
- Total net worth includes everything, including your home. It's the best measure of overall wealth and long-term progress.
- Liquid net worth counts only assets you can access quickly in cash (checking, savings, taxable investments) minus debts, excluding home equity and retirement accounts. It measures what you could actually spend in an emergency.
Someone with $300,000 of home equity and $2,000 in the bank has high net worth but low liquidity. Both numbers matter; neither is complete alone.
What to be careful with
Some assets are easy to value precisely (a checking balance). Others are estimates:
- Home value — use a conservative estimate; selling costs (agent fees, closing) can take 6-10% off the top.
- Vehicles — depreciate fast; use current market value, not what you paid.
- Retirement accounts — taxes and penalties may apply on early withdrawal, so the spendable value is lower than the balance.
- Collectibles and business interests — hard to value and illiquid; be conservative.
Why track net worth over time?
The trend matters more than any single snapshot. Checking net worth once or twice a year shows whether debt is shrinking, savings are growing, and big decisions (buying a home, changing jobs, paying off a loan) are moving you in the right direction. It cuts through the noise of monthly fluctuations and reveals the real direction of travel.
A few tracking tips:
- Pick the same date each year (e.g., January 1) for apples-to-apples comparison.
- Don't obsess over market swings month to month — look at the multi-year arc.
- A negative net worth (common for new graduates with student debt) is a starting point, not a verdict.
Use the calculator
Build a quick snapshot with the Net Worth Calculator. To improve the number, work both sides: grow assets with the Savings Goal Calculator, and shrink liabilities with the Debt Payoff Calculator.
This guide is educational only and is not financial, investment, tax, legal, or accounting advice. See our disclaimer.