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Net worth is the total value of your assets minus your liabilities. Net worth gives you a snapshot of your finances that can help you size up your financial health and measure your progress toward financial goals.
Here's more about what net worth is, how to calculate it and how to use it to better understand your financial position.
What Is Net Worth?
Net worth is the difference between your total assets and total liabilities. One way to think about it: Net worth is what would be left over if you cashed out all your assets and paid off your debts.
Net worth is separate from income, and it's a good complement for measuring your financial health. Use net worth to understand the relationship between what you owe and what you own. It can tell you whether you're overextended on debt—or heading in that direction. It can also show your progress toward financial goals. Together with your budget, debt-to-income ratio and credit score, your net worth is a valuable indicator of how you're doing financially.
How to Calculate Net Worth
To calculate your net worth, add up your assets and subtract your liabilities. You can start with a blank sheet of paper, an online net worth calculator or a spreadsheet. Here are the basic steps you'll follow:
1. Total Your Assets
Make a list of your assets, including bank account balances, retirement funds, investments and major assets like your home, cars, valuables and life insurance. Using the template below, estimate the value of each asset, then total up your assets on the last line.
| Asset Category | Examples | How to Estimate Value | Your Amount |
|---|---|---|---|
| Cash | Savings, checking and money market accounts | Check your online account or statement | |
| Retirement | 401(k)s, IRAs | Check your online account or statement | |
| Taxable investments | Brokerage accounts, cryptocurrency | Check your online account or statement | |
| Home value | What your home is worth | Use a home value estimator or home appraisal | |
| Vehicles (owned or financed, not leased) | What your cars are worth | Use a car valuation site | |
| Other major assets | Health savings accounts, cash value life insurance, real estate, collectibles, art, jewelry, boats, RVs | Check your online account or use an online marketplace or online valuation tool to estimate value |
2. Add Up Your Liabilities
Make a list of your outstanding debts. Check your accounts to get your most recent loan balance or payoff amount, then total your debts on the final line of the template below.
| Asset Category | Examples | How to Estimate Value | Your Amount |
|---|---|---|---|
| Mortgage | Primary mortgage, home equity loan or home equity line of credit | Most recent statement balance or payoff amount | |
| Auto loans | Car loans | Most recent statement balance or payoff amount | |
| Student loans | Student loans | Most recent statement balance or payoff amount | |
| Credit cards | Credit cards | Most recent statement balance or payoff amount | |
| Personal loans | Secured or unsecured personal loans | Most recent statement balance or payoff amount | |
| Other debts | Unpaid taxes, loans from friends or family, 401(k) loans | Most recent statement balance or current amount owed |
Learn more: How Do I Find All My Debt?
3. Subtract Your Liabilities From Your Assets
Subtract your total debts from your total assets to find your net worth.
- A positive net worth means you own more than you owe.
- A negative net worth means your liabilities are greater than your assets.
Learn more: How Do You Calculate Net Worth?
Example of Net Worth
Here's how you might calculate net worth for Madeline, a woman who owns the following assets:
- $25,000 in checking and savings accounts
- $50,000 in a 401(k) account
- Car worth $35,000, currently being financed
- Condo valued at $300,000
$25,000 + $50,000 + $35,000 + $300,000 = $410,000 in assets
Along with her $410,000 in assets, Madeline has the following liabilities, totaling $235,000:
- $10,000 in credit card debt
- $200,000 remaining mortgage balance
- $25,000 car loan
$10,000 + $200,000 + $25,000 = $235,000 in debts
Madeline's net worth is her total assets ($410,000) minus her total liabilities ($235,000), or $175,000. Madeline's $175,000 positive net worth shows that she has more assets than debt.
$410,000 ᠆ $235,000 = $175,000
Example of Negative Net Worth
On the flip side, say James has a negative net worth. His assets include:
- $200 in a bank account
- Car valued at $20,000, owned outright
- Home valued at $250,000
$200 + $20,000 + $250,000 = $270,000 in assets
James has the following debts:
- $40,000 in student loans
- $15,000 on a credit card
- $225,000 remaining mortgage balance
- $5,000 on a personal loan
$30,000 + $10,000 + $200,000 + $2,000 = $285,000 in debts
So, James has a negative net worth of $15,000. If he were to cash in all his assets, he still would not have enough to pay for all his outstanding debts.
$270,000 ᠆ $285,000 = -$15,000
How to Increase Your Net Worth
You can improve your net worth by saving money, increasing assets and paying off debt. Here are seven tips to help you move in the right direction.
1. Track Your Net Worth
Start by calculating your net worth and tracking it over time. Whether you choose to check it yearly, quarterly, monthly or even weekly, you'll see your progress toward saving money and accumulating wealth. You may also uncover rising debt or a decline in the value of your home or investments.
2. Find More Ways to Save
Saving money increases your assets and may help you avoid (or at least minimize) debt when confronted with a large expense.
- Work on a budget. If you haven't already created a plan for managing your income and expenses, start now.
- Reduce your expenses. That includes the money you pay to make and manage your money: investment fees, credit card interest, bank charges and so on.
- Build an emergency fund. Having cash on hand will help you avoid using your credit cards to cover unexpected expenses.
Find High-Yield Savings Accounts
3. Pay Down Debt
Paying off high-interest credit card debt can reduce your liabilities and save you money in interest charges. Also, don't overlook the opportunity to pay down other types of debt:
- Make a bigger mortgage payment every month
- Pay off your car loan faster
- Accelerate student loan repayment
4. Grow Your Retirement
Set goals for funding your retirement and stick to them. Contributing to your employer's 401(k) plan and opening an individual retirement account (IRA) are two good places to start. Investing in a tax-advantaged retirement account may also save you money on taxes, which can help you stash away even more money or avoid additional debt.
Learn more: Ways to Save More for Retirement
5. Build Home Equity
Home equity is the market value of your home minus your mortgage. When you get a new home, your mortgage adds a significant amount of debt to your portfolio. As you pay your mortgage off and your home's value appreciates, however, your home equity grows. You can help the process along by making extra mortgage payments or improving your home's value with a renovation or addition.
Learn more: How to Pay Off Your Mortgage Early
6. Increase Your Income
While raising your income won't automatically increase your net worth, more income gives you more money to save and invest. Consider taking on outside work or looking for passive income opportunities. Also, take a closer look at your savings account: You may be able to boost interest income by choosing a high-yield savings account.
7. Invest
Grow your assets by investing in stocks, bonds, mutual funds and other investments. A higher rate of return helps you increase your assets and, in turn, your net worth. If you're not sure how to invest, consider working with an investment advisor. Or, look for a brokerage that offers investment advice or robo-advisors at a low cost.
Learn more: How to Start Investing
What Is the Average Net Worth by Age?
The median family net worth for all age groups is $192,900, according to the Federal Reserve's 2023 Survey of Consumer Finances (SCF). Generally speaking, net worth tends to rise with age as savings accumulate and assets appreciate in value. The following table shows median household net worth based on most recent Federal Reserve data, collected in 2022.
| Age | Median Net Worth |
|---|---|
| 34 and younger | $39,000 |
| 35-44 | $135,600 |
| 45-54 | $247,200 |
| 55-64 | $364,500 |
| 65-74 | $409,900 |
| 75 and older | $335,600 |
Source: Federal Reserve, 2023 Survey of Consumer Finances
Frequently Asked Questions
What Is a Good Net Worth?
There's no magic number that represents a good net worth for everyone. Generally speaking, a higher net worth is better than a lower one, and a positive net worth is better than a negative one. However, many people start out with a low—or even negative—net worth, if they haven't accumulated many assets or are shouldering student loan debt, for example.
It may be more useful to focus on progress. Saving money, paying down debt and investing wisely in appreciating assets all can help you improve your net worth over time. If your net worth is declining, you may want to evaluate your saving and spending habits, check your debt levels and look at the performance of your investments. If your net worth is trending upward, you're on a good track.
How Is Net Worth Different From Income?
Both net worth and income can be indicators of financial health, but they measure different things. Net worth shows the difference between your assets and liabilities. Income is what you make from wages, investments, business income, passive income and benefits like Social Security or pensions.
Your income doesn't factor into calculating your net worth, but it can have an influence. If your income is low or disrupted due to a job loss, you may incur debt or spend your savings to make ends meet, lowering your net worth. On the other hand, a higher income gives you more opportunity to save, invest or pay down debt, all of which may improve your net worth.
Why Does Net Worth Matter?
Net worth provides a wide perspective on your overall financial health. Tracking your net worth can help you set financial goals, check your progress toward those goals and evaluate risk. Increasing your net worth is a worthy goal as you move toward retirement, when you may be more reliant on assets (and minimal debt) to maintain your lifestyle.
Lenders may use net worth to help evaluate your creditworthiness. Although net worth has no direct impact on calculating your credit score, a lender may consider your net worth as part of the home loan approval process. You may be asked to list your assets, which the lender may compare against your outstanding debt to better understand your ability to repay a loan.
What if I Have a Negative Net Worth?
A negative net worth means you have more debts than assets, which could be a sign of financial vulnerability. If your liabilities outweigh your assets, you may want to avoid taking on additional debt until your position improves, or consider strategies like the debt snowball or debt avalanche to pay off your debt balances.
How Often Should I Calculate My Net Worth?
Calculating your net worth at least once or twice a year helps you track your long-term financial progress and spot potential problems. However, you can check your net worth quarterly, monthly or even weekly if you'd like. Just remember, checking your net worth constantly is a bit like weighing yourself twice a day: You may pick up on changes that aren't especially meaningful in the bigger picture, like fluctuations in home values or the stock market.
The Bottom Line
Measuring your net worth can help you gauge how the assets you're accumulating stack up against the debts you carry—and how your finances are (or aren't) progressing toward long-term goals. Ideally, a lifetime of good habits like saving, investing and paying off debt will lead to higher and higher net worth.
Along the way, keep an eye on your net worth to help you identify potential problems and course-correct if necessary. Together with strategies for budgeting, investing, career development and monitoring credit, tracking your net worth helps you evaluate—and hopefully celebrate—your financial progress.