How to calculate your net worth, and why tracking it beats guessing
Short answer: your net worth is the total of everything you own (assets) minus everything you owe (liabilities). Add up your cash, investments, retirement accounts, home equity and other valuables, subtract your mortgage, loans and card balances, and the result is your net worth. The number matters less than its direction: tracking it every few months shows whether you are moving forward even when your income or the market is noisy.
How do you calculate net worth?
- List your assets at what they are worth today. Bank and savings balances, brokerage accounts, retirement accounts (401(k), IRA), the market value of your home, the resale value of a car, and the value of a business you own.
- List your liabilities at what you owe today. The mortgage balance, student loans, car loans, personal loans, credit card balances and any other debt, including money owed in taxes.
- Subtract. Assets minus liabilities. If it comes out negative, that is normal early in a career, especially with student loans. It is a starting point, not a verdict.
| Example | Amount |
|---|---|
| Cash and savings | $14,000 |
| Retirement accounts | $62,000 |
| Brokerage account | $9,000 |
| Home, market value | $320,000 |
| Car, resale value | $11,000 |
| Total assets | $416,000 |
| Mortgage balance | $255,000 |
| Car loan | $6,500 |
| Student loan | $18,000 |
| Credit card balance | $2,500 |
| Total liabilities | $282,000 |
| Net worth | $134,000 |
What should you count, and what should you leave out?
- Count your home at a realistic market value. Use a recent comparable sale or an online estimate, and be a little conservative. Remember that the mortgage is on the other side of the ledger, so what you really hold is the equity.
- Count retirement accounts at their current balance. They are yours, even if withdrawing early would cost taxes and penalties. Some people also track an after-tax figure, which is lower for pre-tax accounts.
- Value cars and belongings at resale, not purchase price. A car you paid $30,000 for is not worth that today. Everyday items like furniture are usually left out, because you would not realistically sell them.
- Leave out future income. Your expected salary, pension promises and inheritances are not assets yet.
- Include every debt. Forgetting a store card or a family loan makes the number look better than it is.
How often should you update it?
Every three months is enough for most people, and once a year is better than never. Checking daily only tracks market noise. Pick a date, such as the first weekend after each quarter ends, and write the number down. Over a few years you will see the shape of your progress, and a clear picture of where it comes from: paying down debt, saving more, or the market rising.
How do you read the number?
- Look at the change, not the level. A net worth that rises over time means you are building wealth, whatever your starting point.
- Split the change into causes. How much came from saving and paying down debt (which you control) and how much from market moves and home prices (which you do not)?
- Compare with yourself first. Comparisons with other people mix different ages, incomes and family situations. If you want a reference point, see net worth by age, and treat it as a rough guide.
- Watch liquid net worth too. A large number tied up in a house does not pay a bill. Check how much you could reach in a few days, and whether it covers your emergency fund target.
What if it is negative?
Many people start with a negative net worth because of student loans or a car loan that exceeds the car's value. What matters is the trend. Build a small emergency fund first, pay down high-interest debt next, and save for retirement alongside. For a full picture of where you stand across cash, debt, savings and protection, the Annual Money Checkup scores each area and ranks what to fix first.
General education, not financial advice. Asset values and debts change, and your own situation may call for a different approach.
Frequently asked questions
What is net worth?
Net worth is everything you own minus everything you owe. Add up your cash, investments, retirement accounts, home value and other valuables, then subtract your mortgage, loans and credit card balances.
Should I include my house in my net worth?
Yes, at a realistic market value, with the mortgage counted as a debt. What you effectively hold is the home equity. Some people also track a figure without the house, since it is not easy to spend.
Is a negative net worth bad?
It is common early in a career, especially with student loans, and it is a starting point rather than a failure. What matters is whether it improves over time.
How often should I calculate my net worth?
Every three months is enough for most people, and once a year is far better than never. Checking daily mostly tracks market noise.
Do retirement accounts count toward net worth?
Yes. They are yours, even though early withdrawals can bring taxes and penalties. Some people track an after-tax figure separately to be more cautious.