Net worth is the difference between what you own (assets) and what you owe (liabilities). It is the single most comprehensive measure of financial health.
How Net Worth Works
Net Worth = Total Assets − Total Liabilities
Assets include: cash, savings, investments, retirement accounts, home value, vehicles, and other property. Liabilities include: mortgage balance, student loans, car loans, credit card debt, and personal loans.
A positive net worth means you own more than you owe. A negative net worth (common among young adults with student loans) means debts exceed assets.
Why Net Worth Matters
Net worth is a better measure of financial health than income alone. A high earner with massive debts can have a lower net worth than a moderate earner who saves consistently. Tracking net worth over time shows whether you are building wealth or falling behind.
Real-World Example
Assets: $350,000 home + $120,000 in 401(k) + $25,000 savings + $15,000 car = $510,000. Liabilities: $250,000 mortgage + $30,000 student loans + $5,000 credit cards = $285,000. Net worth: $510,000 − $285,000 = $225,000.
Frequently Asked Questions
What is a good net worth by age?
A common benchmark is having 1× your annual salary saved by age 30, 3× by 40, 6× by 50, and 8× by 60. The median net worth for U.S. households is approximately $192,900, but this varies widely by age, income, and region.
Should I include my home in net worth?
Yes, but understand the distinction. Your home is an illiquid asset — you cannot easily spend it. Some financial planners calculate both total net worth (including home) and investable net worth (excluding home equity) for a clearer picture.
How often should I calculate my net worth?
Monthly or quarterly tracking is ideal. Many people update on the first of each month. The trend matters more than any single number — consistent upward movement means you are building wealth.