Net worth is the most complete single-number summary of your financial position. The formula is simple: assets minus liabilities. Everything you own minus everything you owe. The result tells you what you would have left if you sold everything and paid off all your debts today.
The Formula
Net Worth = Total Assets - Total Liabilities
What Counts as an Asset
An asset is anything with measurable financial value. The key rule: use current market value, not what you paid for it.
- Investment accounts: current balance (brokerage, IRA, 401k, 529)
- Cash and savings: checking, savings, money market accounts, CDs
- Real estate: current market value (not purchase price, not what you owe)
- Vehicles: current resale value (not what you paid, not what is owed)
- Business ownership: your estimated equity stake
- Other: collectibles, jewelry, valuable personal property (at fair market value, not sentimental value)
Note that primary residence inclusion is debated. Some financial planners exclude it because it is not liquid and you need somewhere to live. Including it gives a more complete picture of your balance sheet, but understand that it inflates net worth in a way that does not represent investable wealth.
What Counts as a Liability
A liability is any debt or financial obligation. Use the current payoff amount, not the original loan balance.
- Mortgage: current outstanding balance
- Car loans: current payoff amount
- Student loans: current balance
- Credit card balances: total across all cards
- Personal loans, medical debt, HELOC balances
Why Net Worth Is a Snapshot, Not a Score
A net worth number tells you where you are today. It does not tell you whether you are doing well. A 28-year-old with -$30,000 net worth might be on an excellent financial trajectory if that figure reflects a graduate school loan being paid down aggressively on a growing salary. A 55-year-old with $500,000 net worth might be behind their retirement needs.
The number that actually matters is the change in net worth over time. Is it growing? How fast? A rising net worth means your assets are outpacing your debts and your financial position is improving.
Benchmarks by Age (Rough Guidance)
These are rough median benchmarks based on Federal Reserve Survey of Consumer Finances data and should be treated as general context, not personal targets:
Age 25-34: median ~$39,000
Age 35-44: median ~$136,000
Age 45-54: median ~$247,000
Age 55-64: median ~$364,000
Median figures are skewed downward by people with little savings. The averages are much higher because wealth is concentrated. Neither benchmark is a personal target; the more useful comparison is your own trajectory over time.
Why Negative Net Worth Early Is Normal
Student loans, car loans, and credit card balances can easily put a 22-year-old hundreds of thousands of dollars in the hole on paper. This is not a crisis. It is the expected starting position for someone who borrowed to fund education or purchase a vehicle.
What matters is the direction of travel. A negative net worth that is improving by $1,000 per month is better than a positive net worth that is stagnant or declining. Focus on trajectory.
Calculate Your Net Worth
To add up your assets and liabilities and see your complete financial picture, use the Net Worth Calculator.