What is net worth and how to calculate it
What is my net worth? How can I calculate it? Find answers to these and other important personal finance questions with this financial literacy guide.
By: James M. Tobin, Edited by: Rebecca Munday, Reviewed by: R.J. Weiss
Published: June 5, 2025
Net worth is an important indicator of financial health. It represents the total value of everything you own after accounting for all your debts.
Personal finance experts widely recommend tracking your net worth regularly, especially after major economic events in your life. Find out how to calculate net worth in a few simple steps.
What is net worth?
Net worth considers the total value of all your assets minus the total value of all your liabilities. It does not account for variables like your annual income or future earnings. You calculate it using a simple formula:
Assets - Liabilities = Net worth
Knowing your net worth gives you high-level insights into your financial situation, allowing you to track your progress toward monetary goals. At a minimum, you should calculate your net worth annually.
When you're just starting out, it's helpful to track frequently,
R.J. Weiss, a certified financial planner, said. But once you're more established, it may be better to calculate your net worth bi-annually or annually.
Note that your net worth will be negative if your liabilities exceed your assets. A negative net worth means you owe more than everything you own is worth.
What are assets?
An asset is any item of financial value that you own or control. When you calculate your assets, Weiss suggests that you only include items you'll sell under normal circumstances.
The mistake I often see is adding assets that aren't things you're actually going to sell. Yes, you can list things like your TV, sofa, or dining room table as assets because they have value, but chances are you're not selling them anytime soon unless it's absolutely necessary,
Weiss said.
Common assets include cash savings, real estate, and investments like stocks or bonds.
Generally speaking, you should exclude assets like clothing, personal items, and furniture when calculating net worth. These assets do not easily convert into cash and are usually excluded from liquidation actions in the event that you declare bankruptcy.
Assets to include in your net worth
Include the following assets when calculating your net worth:
- All cash held in your bank accounts
- The total value of all holdings in your investment accounts
- Your equity in all properties you own, including your primary residence
- The total value of any ownership stakes you hold in businesses
- Insurance policies you hold that have cash value
- Your vehicle(s)
- Alternative assets like jewelry, artwork, collectibles, and cryptocurrency
This is not a complete list, and you can also include any other item with significant cash value that you own or control.
What are liabilities?
Liabilities are debts you owe to creditors. They represent the value of the financial claims these creditors hold against your assets.
Common examples of liabilities include mortgages, car loans, and unpaid credit card bills. As you calculate your net worth and account for your liabilities,. R.J. Weiss recommends the following:
The biggest thing I see people leave out of their net worth is taxes due. For example, if you're working as an independent contractor, like in the gig economy, you don't get automatic payroll deductions. You need to set aside a portion of what you earn to pay income tax.
Liabilities to include in your net worth
If you have any of the following debts, count them as liabilities when calculating your net worth:
- Outstanding mortgage balances on all properties you own
- All other loan balances you owe, including bank loans, car loans, and student loans
- Credit card balances
- Unpaid taxes
- Personal debts
This is not an exhaustive list of every possible liability a person could have. If you have other debts, account for them to ensure the accuracy of your calculations.
How to learn about building your net worth
Most people build their net worth systematically by gradually accumulating assets and reducing liabilities. Many high-net-worth individuals built substantial wealth in real estate. If this interests you, seek opportunities to learn about property investing. Other common ways people reach higher net worth status are by investing in the stock market, a 401(k), an IRA, or by starting a business.
In order to grow your net worth, it may help to establish a long-term goal with a timeline and create a step-by-step plan for reaching it.
Targeted education can prepare you with valuable insights for managing money and building personal wealth. Consider courses in:
You can also explore other resources for learning about personal finance that draw on expert insights from trustworthy educators.