The single number of your finances
Your net worth is what you would have left if you sold everything you own and paid off everything you owe. Income shows how much money flows in; net worth shows how much you have actually kept. Tracking it once or twice a year is one of the simplest ways to see whether your financial plan is working.
The formula
- Net worth = total assets − total liabilities
- Home equity = home value − mortgage balance
- Liquid net worth = cash and investments − non-mortgage debts
- Debt-to-asset ratio = total liabilities ÷ total assets
Worked example
| Assets | Amount | Liabilities | Amount |
|---|---|---|---|
| Cash and savings | $15,000 | Mortgage | $250,000 |
| Retirement accounts | $60,000 | Auto loan | $12,000 |
| Brokerage account | $20,000 | Student loans | $25,000 |
| Home | $350,000 | Credit cards | $3,000 |
| Vehicles and other | $20,000 |
- Total assets = $465,000; total liabilities = $290,000.
- Net worth = 465,000 − 290,000 = $175,000.
- Home equity = 350,000 − 250,000 = $100,000.
- Liquid net worth = 95,000 − 40,000 = $55,000.
- Debt-to-asset ratio = 62.4%.
Valuing your assets
- Use realistic market values: what the home would sell for, not what you paid, and the private-party value of cars, which lose value every year.
- Count retirement accounts at their balance, keeping in mind that traditional 401(k) and IRA money will be taxed on withdrawal.
- Leave out furniture, clothes and personal items unless they have real resale value.
How you compare
The Federal Reserve’s Survey of Consumer Finances, published every three years, shows median household net worth rising steadily with age, from modest amounts for households under 35 to several hundred thousand dollars near retirement. Medians are far below averages, because a small share of very wealthy households pulls the average up.
Growing your net worth
Net worth rises in three ways: saving part of your income, paying down debt and earning returns on investments. Paying off a 22% credit card is a guaranteed 22% return, better than any investment. A negative net worth is common for young graduates with student loans and is not a cause for alarm if the trend improves each year.
This calculator gives estimates for education and planning. It is not investment, tax or legal advice; for decisions about your own situation, talk to a qualified financial professional.