Your net worth is a simple but powerful number: everything you own minus everything you owe. It is the clearest single snapshot of your overall financial health.
The formula: Net worth = total assets − total liabilities.
Assets — what you own:
- Cash and money in checking and savings accounts.
- Investments and retirement accounts.
- The value of your home and other property.
- The value of vehicles and other significant possessions.
Liabilities — what you owe:
- Mortgage balance.
- Auto, personal, and student loan balances.
- Credit card balances.
- Any other debts.
Calculating it: add up all your assets, add up all your liabilities, and subtract. Net worth can be positive or negative — a negative number is common early on, especially with student loans, and is simply a starting point.
Why it matters: income tells you what you earn, but net worth tells you what you have built. Tracking it once or twice a year shows whether you are truly making progress.
How to grow your net worth: increase assets (save and invest consistently) and reduce liabilities (pay down debt). Both sides move the number in the right direction.