A household earning $200,000/year with $180,000 in spending and $300,000 in debt has negative net worth. A household earning $60,000 with $40,000 spending, no debt, and $200,000 in investments has $200,000 net worth. The second household is objectively wealthier despite earning a third of the income.
The formula: Assets minus Liabilities equals Net Worth. Assets include cash, investments, retirement accounts, real estate, vehicles, business equity. Liabilities include mortgage, student loans, car loans, credit card debt.
What Counts
Include things at current market value, not purchase price. Your car is worth what you’d get selling it today. Be conservative — it’s better to underestimate than overestimate and make decisions on inflated numbers.
The Tracking Habit
Calculating net worth once is useful. Tracking it quarterly is transformative. The emotional feedback loop of seeing your net worth rise $3,000 this month — or drop $2,000 from a credit card vacation — is more powerful than any budget. The median net worth for Americans under 35 is roughly $39,000; by 45-54, about $247,000.
Start with our free Net Worth Calculator — categories for cash, investments, property, loans, and visual asset allocation breakdown.