Net worth is the total value of everything you own minus the total of everything you owe. If you own 382,000 and owe 228,500, your net worth is 153,500. The formula is one line, and the work is in gathering honest numbers.
The formula
Net worth = total assets − total liabilities
- Assets are things you own that have a money value: cash, savings, investments, property, a car, a business stake.
- Liabilities are amounts you owe: a mortgage, a car loan, student loans, credit card balances, money borrowed from a person.
The result can be positive, zero or negative. It is a snapshot of one day, not a score.
Step 1: list what you own
Write down every asset and its value today. Group them so nothing is missed:
- Cash: current accounts, savings, cash at home.
- Investments: brokerage accounts, funds, ETFs, crypto, precious metals. Use today’s price times the number of units you hold.
- Retirement accounts: use the current balance. See the note below on how to treat them.
- Property: your home and any other property, at a realistic selling price.
- Other things of value: a car, a business interest, money someone owes you.
Use the value you could get if you sold the item today, not what you paid for it. A car bought for 30,000 three years ago may sell for 18,000. The 18,000 goes in the list.
Step 2: list what you owe
Write down every debt with the balance outstanding today, not the original amount and not the monthly payment:
- Mortgage and other loans
- Car loans
- Student loans
- Credit card balances
- Taxes due, or money you owe a friend or relative
Use the current balance. A mortgage that started at 300,000 and has been paid down to 220,000 counts as 220,000.
Step 3: subtract
Add the assets, add the liabilities, and subtract the second from the first.
A worked example
| Assets | Value |
|---|---|
| Checking account | 8,000 |
| Savings account | 22,000 |
| Brokerage account | 40,000 |
| Home (realistic sale price) | 300,000 |
| Car (what it would sell for) | 12,000 |
| Total assets | 382,000 |
| Liabilities | Balance |
|---|---|
| Mortgage | 220,000 |
| Car loan | 7,000 |
| Credit card | 1,500 |
| Total liabilities | 228,500 |
Net worth = 382,000 − 228,500 = 153,500.
Notice that the home and the mortgage both appear. Leaving out the mortgage would show 373,500, a number that overstates where this person stands by 220,000.
Common mistakes
- Valuing things at purchase price. Cars, electronics and furniture lose value. Use a realistic sale price. For property, recent sales of similar homes are a better guide than what you paid.
- Counting the asset but not its debt. A home without its mortgage, or a car without its loan, inflates the result. Every loan belongs in the second list.
- Counting the debt but forgetting the asset. The opposite error understates it.
- Using a monthly payment instead of the balance. What matters is how much you still owe in total.
- Counting things you could not realistically sell. Everyday furniture, clothes and household goods are usually left out. Include an item only if it has meaningful resale value and you would be willing to sell it.
- Mixing currencies. Convert every balance to one currency, using the exchange rate of the day, before you add.
- Changing the rules between snapshots. If last quarter you left out the car and this quarter you include it, the change in the number means nothing.
How to treat retirement accounts
Retirement accounts are assets, and many people include them at their current balance. Two things to keep in mind. Some accounts have taxes or penalties on withdrawal, so the amount you could actually spend today is lower than the balance. And money you cannot reach for years behaves differently from a savings account. Some people keep a second figure for “net worth without retirement accounts”. Whichever you choose, apply it every time.
What not to count
- Your income, or the salary you expect to earn.
- Future inheritances or expected bonuses.
- A pension promise you cannot see a balance for.
- Monthly bills that are not yet debts, such as next month’s rent.
Net worth is what exists today. Expected money is not part of it.
Doing it more than once
One calculation tells you where you stand. Repeating it tells you which way you are moving. Keep the same list of accounts, the same valuation rules and the same currency each time. For how to lay the lists out, see the personal balance sheet. If you are unsure whether something is an asset or a liability, read assets vs liabilities.
A spreadsheet is enough to do this; see Accounted vs a spreadsheet for the trade-offs. If you would rather not maintain formulas, Accounted is an iPhone app that puts the same two lists on one balance sheet, drawn to scale, with no bank login. See the net worth tracker page or how it works.
This guide is general information, not financial advice.
General information, not financial advice.