How to calculate your net worth
At a glance
- Net worth is the difference between what you own (assets) and what you owe (liabilities).
- To calculate your net worth, subtract liabilities, such as mortgages, rent, loans and credit cards from your assets, such as cash, investments, real estate, or personal property
- Calculating your net worth regularly helps track financial progress, set goals, and make informed money decisions.
- A positive net worth means your assets exceed your liabilities, while a negative net worth indicates more debt than owned assets.
- Improving net worth involves strategies like paying down debt, increasing savings, and investing in appreciating assets.
As you look to improve your financial health, it’s a good idea to assess where you’re starting. In this post we’ll explain how to calculate your current net worth.
What’s your net worth?
In simple terms, net worth is the difference between what you own (assets) and what you owe (liabilities). Calculating your net worth is much more than the math. It’s an opportunity to asses your financial situation. It’s the first step on the process towards more advanced financial planning, like saving for retirement or paying off your debts.
How to calculate your net worth
Essentially calculating your net worth means you add up assets—things like cash on hand, cash in checking, market value of your home, market value of your property and the value of your retirement account, investments, and other assets.
Then once you have that total, you subtract the total of your liabilities to get to your net worth. Liabilities are the balance owed on your loans—from student loans to credit card to mortgages—as well as unpaid utilities and back taxes, among other money you know you’re going to have to pay in the future.
For instance, your net worth calculation might look like this:
| Assets | Liabilities |
| Cash in checking: $2,000 | Student loans balance: $11,000 |
| Cash in savings: $5,000 | Balance owed on credit cards: $1,150 |
| Value of car: $10,000 | Balance owed on car loan: $8,000 |
| Value of 401(k): $16,000 | Balance owed on other loans: $2,000 |
| Total: $33,000 | Total: $22,150 |
Subtract total liabilities ($22,150) from total assets ($33,000): $10,850
In this example, your total net worth is $10,850.
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Is a positive net worth good?
A positive net worth means your assets exceed your liabilities, while a negative net worth means you have more liabilities than assets. If your number is negative, don’t be discouraged! While it’s not a rosy picture of financial health, you can’t fix the problem until you know the extent of the damage.
Remember: Net worth is unique to your situation, and a negative number doesn’t always mean your affairs are out of order. For instance, a doctor just graduating medical school is likely buried in student debt, but due to the steady future income stream and employability conferred by the new degree, a negative net worth isn’t as bad as it appears.
Of course, it’s better to have a positive number—your net worth is an accurate way to measure how much money you truly have, so the larger your net worth number, the more well-off you are right now.
Once you have assessed your net worth, the next step is to figure out how to get from your current state to where you want to go. Generally, improving net worth involves strategies like paying down debt, increasing savings and investments. Again, it’s a highly individual process, but for many it will include creating a timeline for becoming debt-free, as well as creating or optimizing a retirement savings plan.
Subtracting your liabilities from your assets may seem like a simple math problem, but a well-thought out net worth statement is an important foundation you can build all your future financial planning on top of. So go ahead and calculate your financial worth, and let us know in the comments how you’re going to use it to plan your financial future!
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