How to Calculate Your Net Worth (and Why It Matters More Than Your Salary)
Your salary tells you what you earn. Your net worth tells you where you actually stand financially. Here's how to calculate it properly and why tracking the trend matters more than the number.
A high salary doesn't guarantee financial security — plenty of high earners live paycheck to paycheck, while some modest earners build substantial wealth. Net worth is the number that actually captures your financial position, because it accounts for both what you own and what you owe.
The Simple Formula
Net worth is refreshingly simple to calculate:
**Net Worth = Total Assets − Total Liabilities**
The complexity is entirely in accurately listing what belongs in each bucket.
What Counts as an Asset
- Cash and savings account balances
- Investment and brokerage accounts
- Retirement accounts (401(k), IRA, pension value)
- Your home's current market value (not what you paid for it)
- Vehicles, at current resale value (not purchase price)
- Any other property or valuables with real resale value
What Counts as a Liability
- Mortgage balance (not your home's value — just what you still owe)
- Auto loan balances
- Student loan balances
- Credit card balances
- Personal loans, medical debt, and any other outstanding obligation
Two Valuation Mistakes That Skew Your Number
1. **Using purchase price instead of current value for depreciating assets.** A car you bought for $35,000 three years ago might only be worth $22,000 today. Using the original price overstates your assets. 2. **Using original purchase price for your home.** Home values change — sometimes significantly — over the years you own them. Use a realistic current market estimate, not what you paid at closing.
Why a Negative Net Worth Isn't a Crisis
It's genuinely common — even expected — to have a negative net worth early in adulthood, especially with student loans or a mortgage that's larger than your current home equity. A negative number today isn't a verdict on your financial habits; it's a snapshot. What matters far more is the **trend**: is your net worth improving year over year?
Why Net Worth Beats Salary as a Financial Health Metric
Two people earning the same $100,000 salary can have wildly different net worths depending on their spending habits, debt levels, and how long they've been saving and investing. Salary measures cash flow in a given year; net worth measures accumulated financial progress over your entire life so far.
Worked Example
Assets: $15,000 cash + $45,000 investments + $320,000 home value + $22,000 vehicles + $85,000 retirement = **$487,000**
Liabilities: $210,000 mortgage + $12,000 auto loan + $4,500 credit cards + $18,000 student loans = **$244,500**
**Net worth = $487,000 − $244,500 = $242,500** (≈49.8% of assets are equity, not owed to lenders)
Try the calculator
List your assets and liabilities to see your net worth calculated instantly, with a visual breakdown of what you own versus what you owe, using our Net Worth Calculator.
Try the calculator
Calculate your total net worth by listing your assets and liabilities. See a visual breakdown of your financial picture and track your wealth over time.