How to Calculate Your Net Worth (Step-by-Step)
Net worth is simply the difference between what you own (assets) and what you owe (liabilities). It's a single number that represents your overall financial position at a point in time.
The Simple Formula
Net Worth = Total Assets - Total Liabilities
Add up everything you own, subtract everything you owe, and you have your net worth.
What Counts as an Asset?
- Cash and bank accounts (checking, savings, money market)
- Investment accounts (brokerage, retirement accounts like 401k and IRA)
- Real estate (your home, rental properties, land)
- Vehicles (cars, boats, recreational vehicles)
- Personal property (jewelry, collectibles, art with significant value)
- Business ownership (value of businesses you own)
What Counts as a Liability?
- Mortgage (remaining balance on your home loan)
- Car loans (what you still owe on vehicles)
- Student loans (education debt)
- Credit card balances (outstanding credit card debt)
- Personal loans (money borrowed from banks or individuals)
- Medical debt (unpaid medical bills)
Why Track Net Worth?
Tracking your net worth over time helps you see your overall financial progress, understand if you're moving forward or backward, make informed decisions about spending and saving, and set realistic financial goals.
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