How to Calculate Your Net Worth (and Why It Matters More Than Income)
Net worth is what you own minus what you owe. Learn how to calculate it step by step, what to include, an example, and how to track and grow your net worth over time.
Your income tells you how much money flows in. Your net worth tells you how much of it you've actually kept. It's the single best number for tracking your financial progress, and it takes about 20 minutes to calculate.
The formula
Step 1: List your assets
- Cash: checking, savings, CDs, money market accounts
- Investments: brokerage accounts, I bonds, HSA investments
- Retirement accounts: 401(k), 403(b), IRAs (use the current balance)
- Home: a realistic market value, not what you hope to sell for
- Vehicles: current private-party value from a pricing guide
- Other valuable property you could actually sell
Skip everyday items like furniture and clothes. They rarely sell for much, and including them inflates the number.
Step 2: List your liabilities
- Mortgage balance and home equity loans
- Car loans
- Student loans
- Credit card balances
- Personal loans, medical debt, BNPL plans, money owed to family
Step 3: Subtract
| Assets | Amount | Liabilities | Amount |
|---|---|---|---|
| Checking & savings | $12,000 | Mortgage | $240,000 |
| 401(k) | $58,000 | Car loan | $14,000 |
| Roth IRA | $21,000 | Student loans | $18,000 |
| Home value | $310,000 | Credit card | $3,000 |
| Car value | $16,000 | ||
| Total assets | $417,000 | Total liabilities | $275,000 |
Net worth: $417,000 − $275,000 = $142,000.
Negative net worth? That's common
Many people, especially recent graduates with student loans, start with a negative net worth. It's a starting point, not a verdict. What matters is the direction: is the number going up over time?
How to grow your net worth
- Spend less than you earn and direct the difference on purpose. See the 50/30/20 budget.
- Pay off high-interest debt; every dollar of debt repaid increases net worth dollar for dollar. See avalanche vs snowball.
- Invest consistently in retirement and brokerage accounts. See how to start investing.
- Capture free money such as the 401(k) match and HSA employer contributions.
- Avoid fast-depreciating purchases financed with debt, especially expensive cars. See how much car you can afford.
Tracking it
- Update your net worth quarterly or twice a year. Monthly updates can feel noisy because markets move.
- Use the same method each time (for example, the same home value source).
- A simple spreadsheet works; some budgeting apps can link accounts and calculate it automatically.
- Track liquid net worth too (excluding your home and car) to see what you could access.
Net worth vs income
Two people earning $100,000 can have wildly different net worths. One saves 20% and invests it; the other spends everything and carries debt. Over a decade the gap can be enormous. Income gives you the opportunity; net worth shows whether you used it.
Key takeaways
- Net worth = assets − liabilities.
- Use realistic values and skip everyday personal items.
- A negative starting number is common; focus on the trend.
- Pay down debt, invest consistently and review every few months.
Free download
Free 50/30/20 Budget Spreadsheet
Enter your take-home pay and expenses, and it splits your money into needs, wants and savings automatically.
- Works in Excel, Google Sheets and Numbers
- Built-in targets and "left to assign" tracker
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