Net worth is the single most complete picture of your financial health. It tells you not just what you earn, but what you actually own. Here's how to calculate it and why tracking it changes everything.
The Simple Formula
Net Worth = Total Assets − Total Liabilities
Assets are everything you own that has value. Liabilities are everything you owe. Subtract one from the other and you have your net worth — which can be positive, negative, or zero.
What Counts as an Asset?
- Cash and savings accounts
- Investment and retirement accounts (401k, IRA, brokerage)
- Home equity (market value minus mortgage owed)
- Vehicles (current market value)
- Business ownership value
- Other valuable property
What Counts as a Liability?
- Mortgage balance
- Car loans
- Student loans
- Credit card balances
- Personal loans
- Any other debt you owe
Why Tracking Net Worth Matters
Income tells you how much money flows in. Net worth tells you whether it's sticking. Two people earning $80,000 a year can have wildly different net worths depending on their spending, saving, and debt habits. Tracking net worth monthly keeps you honest and motivated.
💡 Apps like Personal Capital (now Empower) and Monarch Money automatically track your net worth by linking your accounts.
🎯 Bottom line: Calculate your net worth today, write it down, and recalculate every month. Watching it grow is one of the most motivating things in personal finance.