Quick Answer
Net worth is calculated by subtracting total liabilities (debts) from total assets (everything you own): Net Worth = Total Assets − Total Liabilities.
What Is Net Worth?
Net worth is a single number that summarizes your overall financial position at a point in time, it's the value of everything you own (assets) minus everything you owe (liabilities). Unlike income, which measures money flowing in over a period, net worth measures accumulated wealth at a specific moment, making it one of the most commonly used metrics for tracking long-term financial progress.
Assets typically include cash and bank balances, investments (stocks, bonds, mutual funds, retirement accounts), real estate, vehicles, and other property of value. Liabilities include mortgages, car loans, credit card balances, student loans, and any other money owed. A positive net worth means assets exceed liabilities; a negative net worth means the opposite, common for those with large student loans or recent mortgages relative to their other assets.
Tracking net worth over time, rather than focusing on a single snapshot, is generally more useful for financial planning, since it reveals whether your overall financial position is improving, since both asset growth and debt reduction both contribute positively.
How to Use
- 1List all your assets: cash, savings, investments, property, vehicles, and other valuables, with their current market value.
- 2List all your liabilities: mortgage balance, loans, credit card debt, and any other money owed.
- 3Add up total assets and total liabilities separately.
- 4The calculator subtracts total liabilities from total assets to give your net worth.
Formula
Net Worth = Total Assets − Total LiabilitiesExample: Calculating net worth from assets and liabilities
- Assets: Cash 200,000 + Investments 500,000 + Property 5,000,000 + Vehicle 800,000 = 6,500,000
- Liabilities: Mortgage 3,000,000 + Car loan 400,000 + Credit card 50,000 = 3,450,000
- Net Worth = 6,500,000 − 3,450,000
Tips & Things to Know
- Use realistic current market values for assets like property and vehicles, not the original purchase price, these values typically change (often depreciating for vehicles, sometimes appreciating for property) over time.
- Recalculate net worth periodically (e.g. quarterly or annually) rather than once, since the trend over time is far more informative than any single snapshot.
- Retirement accounts and other illiquid assets (hard to quickly convert to cash) still count toward net worth, but it's worth tracking liquid vs. illiquid net worth separately if cash-flow flexibility matters to you.
- A negative net worth early in life, common with student loans or a new mortgage, isn't necessarily alarming; what matters more is the trend over subsequent years.