What Is Net Worth?
Net worth is the value of everything you own minus the money you owe. It provides a snapshot of your overall financial position at a particular point in time.
Your assets can include cash, savings accounts, investments, property and other assets with financial value. Your liabilities include debts such as credit card balances, personal loans, student loans and mortgages.
Net worth is different from income. Income measures the money you receive over a period of time, while net worth measures the value of your assets after subtracting your liabilities.
How to Calculate Net Worth
To calculate your net worth, add the current value of all your assets and subtract the total amount of your outstanding liabilities.
For example, if you have $50,000 in total assets and $20,000 in liabilities, your net worth would be $30,000.
If your liabilities are greater than your assets, your net worth will be negative.
What Does a Net Worth Calculator Include?
A personal net worth calculator can include the major assets and liabilities that make up your financial position. This calculator separates them into two main categories so you can enter the current value of each item.
Assets
Assets are things you own that have financial value. The calculator includes cash, savings accounts, investments, property and other assets.
When entering assets, use their current estimated value rather than the amount you originally paid for them.
Liabilities
Liabilities are amounts you currently owe. These can include credit card debt, personal or student loans, mortgage balances and other debts.
Using your current outstanding balances gives you a more useful estimate of your present net worth.
Why Calculate Your Net Worth?
Tracking your net worth can help you understand how your overall financial position changes over time. Reviewing it periodically can show whether your assets are increasing, your debts are decreasing, or both.
Calculating your net worth can also give you a clearer picture of your finances when setting savings goals, paying down debt or planning for major financial decisions.
Net Worth vs. Income
Income and net worth measure different aspects of your finances. Income is the money you receive during a period, such as a month or year. Net worth represents the value of your assets minus your liabilities at a particular point in time.
Someone can have a high income and a relatively low net worth if they have significant debts or limited assets. Likewise, someone with a lower current income can have a substantial net worth if they have accumulated assets over time.
How to Track Your Net Worth Over Time
To track your net worth, calculate it using the same basic categories at regular intervals. Record your total assets and total liabilities and compare the results over time.
Changes in savings, investments, property values and outstanding debt can all affect your net worth. Keeping a record of your calculations can make these changes easier to see.
Example of Calculating Net Worth
Suppose you have $5,000 in cash, $10,000 in savings and $5,000 in investments. Your total assets would be $20,000 if you have no other assets.
If you also have $4,000 in outstanding debt, your estimated net worth would be $16,000.
The calculation is: $20,000 − $4,000 = $16,000 .
Frequently Asked Questions
What should I include in my net worth?
Include your major assets such as cash, savings, investments and property, as well as your outstanding debts and other liabilities.
How do I calculate my net worth?
Add the current value of your assets and subtract your outstanding debts and other liabilities. The result is your net worth.
Is a negative net worth possible?
Yes. If your total liabilities are greater than your total assets, your net worth will be negative.
Does net worth include my income?
No. Income is money you receive over a period of time, while net worth is calculated from the value of your assets and liabilities at a particular point in time.
How often should I calculate my net worth?
There is no required frequency. Reviewing your net worth every few months or once or twice a year can help you track changes in your assets and liabilities over time.
Can my net worth change even if my income stays the same?
Yes. Your net worth can change when your savings, investments, property values or debts change, even if your income remains the same.
What is a personal net worth calculator?
A personal net worth calculator is a tool that estimates your financial position by adding your assets and subtracting your liabilities. It can help you create a simple snapshot of your current finances.