How to Calculate Your Net Worth (and Why It Matters)
Your net worth is a single number that captures your overall financial position. Tracking it over time shows whether you are moving in the right direction, even when month-to-month budgets feel messy.
The formula
Net worth equals what you own (assets) minus what you owe (liabilities).
List your assets
- Cash in checking and savings accounts
- Retirement accounts such as a 401(k) or IRA
- Brokerage accounts
- Your home's estimated market value
- Vehicles, at a realistic resale value
- Other valuable property you could sell
List your liabilities
- Mortgage balance
- Car loans
- Student loans
- Credit card balances
- Personal loans and any other debts
An example
Suppose you have $8,000 in savings, $25,000 in a 401(k), and a car worth $12,000, for $45,000 in assets. You owe $9,000 on the car, $18,000 in student loans, and $3,000 on a credit card, for $30,000 in liabilities. Your net worth is $15,000.
Do not panic if it is negative
Many people, especially recent graduates, start with a negative net worth because of student loans. What matters most is the trend.
How often to check
Updating your net worth every three to six months is enough. Checking more often mostly reflects market swings rather than your own progress.