Your net worth is the single most important number in personal finance. It's your financial scoreboard—a snapshot of where you stand right now.
What Is Net Worth?
Net Worth = What You Own - What You Owe
That's it. Add up everything you own (assets), subtract everything you owe (liabilities), and you have your net worth.
Your Assets (What You Own)
Liquid Assets (Easy to Access)
- Checking accounts
- Savings accounts
- Money market accounts
- Cash
Investment Assets
- 401(k) and IRA balances
- Brokerage accounts
- HSA balance
- Cryptocurrency
Property Assets
- Home value (current market value)
- Car value (what you could sell it for)
- Valuables (jewelry, collectibles, etc.)
Your Liabilities (What You Owe)
Short-Term Debt
- Credit card balances
- Medical bills
- Personal loans
Long-Term Debt
- Mortgage balance
- Student loans
- Car loans
Calculating Your Net Worth
| Assets | Amount |
|---|---|
| Checking account | $2,500 |
| Savings account | $5,000 |
| 401(k) | $25,000 |
| Car value | $12,000 |
| Total Assets | $44,500 |
| Liabilities | Amount |
|---|---|
| Credit cards | $3,000 |
| Student loans | $18,000 |
| Car loan | $8,000 |
| Total Liabilities | $29,000 |
Net Worth = $44,500 - $29,000 = $15,500
What Your Net Worth Tells You
Negative Net Worth
You owe more than you own. This is common for young adults with student loans. It's a starting point, not a life sentence.
Zero to $50,000
You're building. Focus on eliminating high-interest debt and building an .
$50,000 to $250,000
You're growing. Continue investing and let work.
$250,000+
You're accumulating significant wealth. Focus on tax optimization and long-term planning.
Why Net Worth Matters More Than Income
"Two neighbors earn the same $80,000 salary. One has a $300,000 net worth; the other has $30,000. Same income, completely different financial situations."
Income is temporary—it stops when you do. Net worth is permanent—it works for you 24/7.
High income + low net worth = Spending too much, not building wealth Moderate income + high net worth = Smart money management, building wealth
Tracking Net Worth Over Time
Calculate your net worth monthly or quarterly. The trend matters more than any single number.
| Date | Net Worth | Change |
|---|---|---|
| Jan 1 | $15,500 | — |
| Apr 1 | $18,200 | +$2,700 |
| Jul 1 | $22,100 | +$3,900 |
| Oct 1 | $25,800 | +$3,700 |
Pro Tip
A rising net worth means you're making progress. A falling net worth is a warning sign to investigate.
Common Net Worth Questions
Should I include my home?
Yes, but be conservative with the value. Use recent comparable sales, not Zillow estimates.
What about my car?
Yes, but use what you could sell it for today, not what you paid.
What if my net worth is negative?
That's okay—it's your starting point. Many people start negative due to student loans. Track the trend and watch it improve.
The Bottom Line
Quick Win
Calculate your net worth today. Write it down. This is your financial starting line. From here, every dollar you save increases it. Every debt you pay off increases it. Watch it grow.
Net worth isn't about comparing yourself to others. It's about making progress toward your own financial goals.