What is net worth, and how do you calculate it?

Net worth is what you own minus what you owe — every asset added up, minus every liability, at a single point in time. It's the one number that sums up your entire financial picture, whether you're 22 with student loans or 62 with a paid-off house.

The formula, in plain terms

Net worth = Assets − Liabilities

• A asset is anything you own that's worth money.
• A liability is anything you owe money on.

Subtract the second from the first and you have a single number that represents your entire financial position — not your income, not your savings account balance, all of it netted together.

What counts as an asset

List everything with real resale or cash value:

• Cash and cash equivalents — checking, savings, money market accounts.
• Investments — brokerage accounts, individual stocks, index funds, bonds.
• Retirement accounts — 401(k), 403(b), traditional and Roth IRAs, pensions with a cash value.
• Real estate — the current market value of your home or any property you own, not what you paid for it.
• Vehicles — current resale value (check a valuation guide), not the sticker price.
• Business ownership — your stake in a business, if it has real resale value.
• Other valuables — collectibles, jewelry, or anything else with a genuine, verifiable resale market.

What counts as a liability

List every dollar you owe, regardless of the interest rate or how "good" the debt is considered:

• Mortgage balance — the amount left to pay, not the original loan amount.
• Auto loans
• Student loans
• Credit card balances — the amount carried past the due date, not your credit limit.
• Personal loans and lines of credit
• Any other debt — medical bills on a payment plan, money owed to family, buy-now-pay-later balances.

How to calculate yours in four steps

1. List every asset and its current value — use statements, not guesses, wherever you can.
2. List every liability and its current balance, not the original loan amount.
3. Add up each list separately, then subtract total liabilities from total assets.
4. Write down the date next to the result — a single number means little without a timeline to compare it to later.

An example with real numbers

Here's an illustrative snapshot for one hypothetical household:

Assets	Value
Checking + savings	$8,000
Brokerage account	$22,000
401(k)	$45,000
Car (resale value)	$12,000
Home (market value)	$310,000
Total assets	$397,000

Liabilities	Balance
Credit card balance	$3,000
Auto loan	$9,000
Student loans	$18,000
Mortgage balance	$260,000
Total liabilities	$290,000

Net worth = $397,000 − $290,000 = $107,000.

Notice that the home is the largest asset and the mortgage is the largest liability — for most homeowners, home equity (the gap between the two) makes up a large share of total net worth.

Why net worth beats income or a bank balance as "the" number

• Income measures cash flow, not wealth. A high earner with high spending and high debt can have a lower net worth than a modest earner who saves consistently.
• A bank balance ignores debt entirely. $20,000 in savings looks very different next to $0 in debt than next to $80,000 in credit card balances.
• Net worth nets everything together, which is exactly why it's the hardest number to fake and the most complete single measure of financial position.

Common mistakes to avoid

• Using purchase price instead of resale value for cars, electronics, or furniture — these depreciate fast, and counting them at what you paid overstates your assets.
• Forgetting small debts — a $2,000 buy-now-pay-later balance or an old medical bill still counts.
• Counting home value without the mortgage, or vice versa — both numbers matter; only the gap between them (equity) is the actual asset value to your net worth.
• Recalculating too often and reacting to noise — investment and home values move week to week; a monthly or quarterly cadence shows the real trend without the whiplash.
• Getting discouraged by a negative number — many people in their 20s have negative net worth because of student loans and no assets yet. It's a starting line, not a grade.