Net Worth

Net worth is calculated by subtracting your total liabilities from your total assets. Assets include everything of value that you own: cash and savings accounts, investment and retirement accounts, real estate, business interests, vehicles, and personal property. Liabilities include all debts and obligations: mortgage balances, car loans, student loans, credit card balances, and any other amounts you owe.

A positive net worth means your assets exceed your liabilities. A negative net worth means you owe more than you own, which is common among younger adults with student loan debt or recent homebuyers with small down payments. Over time, as you pay down debt and accumulate savings, your net worth generally increases.

Tracking net worth on a regular basis, such as quarterly or annually, may be more meaningful than focusing on any single financial metric. Your income tells you what you earn, but not what you keep. Your savings rate tells you how much you are setting aside, but not whether it is outpacing your debt. Net worth captures the overall picture by netting everything together.

When calculating net worth, it is generally best to use realistic estimates of asset values. The fair market value of your home (not the purchase price or the Zillow estimate), current account balances, and the realistic resale value of vehicles and personal property provide the most accurate snapshot. Some financial planners distinguish between "liquid net worth" (excluding illiquid assets like your home or business) and total net worth, which can provide additional perspective on your financial flexibility.

Net worth benchmarks vary widely based on age, income, career stage, and location. Rather than comparing your net worth to national averages, it may be more useful to track your personal trend over time and evaluate whether you are moving in the right direction relative to your own goals and timeline.