Net Worth

What is net worth?

Net worth is the total value of everything you own minus everything you owe at a given point in time. What you own is called your assets, and what you owe is called your liabilities. If your assets are worth more than your debts, your net worth is positive. If you owe more than you own, it is negative.

Key takeaways

• The formula is simple: assets minus liabilities equals net worth.
• Net worth is a snapshot of one moment, so tracking it over time is more useful than any single number.
• A negative net worth is common early in adulthood, especially with student loans, and it can change.
• Income and net worth are different. A high income does not guarantee a high net worth.

How net worth works

Net worth = Total assets minus Total liabilities

Assets include cash in checking and savings, retirement accounts like a 401(k) or Roth IRA, taxable investments, the current market value of your home, and the resale value of a car or other valuable property. Liabilities include your mortgage balance, car loans, student loans, credit card balances, and any other money you owe.

To calculate yours, list each account and its current balance, add up each side, and subtract. Use realistic values. A car is worth what it would sell for today, not what you paid.

Hypothetical example: You have $5,000 in savings, $20,000 in a retirement account, and a car worth $10,000, for $35,000 in assets. You owe $15,000 on student loans, $8,000 on the car, and $2,000 on a credit card, for $25,000 in liabilities. $35,000 minus $25,000 gives you a net worth of $10,000.

Net worth changes in two ways: your assets grow, or your debts shrink. Paying down a loan raises your net worth just as surely as adding to savings does. Investments can also rise and fall with the market, so expect your number to move even in months when you did nothing differently.

Many people recalculate every month or every quarter. The trend line tells you more than any single snapshot, because it shows whether your habits and your cash flow are pushing you in the right direction.

Why it matters for your Money Type

Priceless Tay groups money habits into four Money Types: Spender, Saver, Scrambler, and Strategist. Net worth matters most to the Strategist.

A Strategist already has a plan that works: bills are covered, savings happen, and some investing is in place. Their challenge is making the plan fit a bigger income or a bigger life. Net worth is the scoreboard for that. It shows whether a raise actually turned into wealth or just into higher spending, and it helps a Strategist compare choices, such as paying down a low-rate mortgage versus investing more, by their effect on the bottom line.

For other types, net worth can be a motivating check-in rather than the main focus. A Scrambler may get more from tracking monthly cash flow first, since stabilizing the month comes before growing the total. A Saver can use net worth to see that invested money counts too, not just cash.

Common questions

Can net worth be negative?

Yes. If your debts are larger than the value of your assets, your net worth is negative. This is common for people with student loans or large credit card balances, and it improves as you pay down debt and build savings.

Should I include my home in my net worth?

Most people include their home's estimated market value as an asset and the remaining mortgage balance as a liability. The difference is your home equity. Some people also track a second number without the home, since it is hard to spend home equity without selling or borrowing.

Is net worth the same as income?

No. Income is the money you earn over a period of time. Net worth is what you have left after subtracting debts from assets. Someone can earn a lot and still have a low net worth if most of it is spent or owed.

How often should I calculate my net worth?

Monthly or quarterly works well for most people. Checking too often can make normal market swings feel dramatic, while checking once a year can hide problems until they grow.