Net Worth
What Is Net Worth?
The net worth formula
Net worth is the difference between what you own and what you owe. It's the single number that sums up your entire financial position in one figure, calculated as:
Net Worth = Total Assets − Total Liabilities
Assets are everything of value you own: cash, bank balances, investments, retirement accounts, real estate, and vehicles. Liabilities are everything you owe: mortgages, auto loans, student loans, and credit card balances. Subtract one from the other and you get your net worth, the clearest single snapshot of your financial health at a point in time.
Income doesn't appear in the formula at all. A high salary that gets spent as fast as it comes in doesn't move your net worth; what matters is what's left over after liabilities are paid off, and whether your assets are growing faster than your debt.
A worked example
Net worth is usually easiest to see laid out like a simple balance sheet: everything you own on one side, everything you owe on the other.
Assets
| Item | Value |
|---|---|
| Cash and savings | $15,000 |
| Retirement and brokerage accounts | $45,000 |
| Home value | $350,000 |
| Vehicle | $20,000 |
| Total assets | $430,000 |
Liabilities
| Item | Value |
|---|---|
| Mortgage balance | $280,000 |
| Auto loan | $12,000 |
| Credit card balance | $3,000 |
| Total liabilities | $295,000 |
Net Worth = $430,000 − $295,000 = $135,000
Notice that the home and the mortgage are counted separately. The full home value goes on the asset side; the remaining loan balance goes on the liability side. The same applies to a financed car or any other asset you're still paying off: the asset and the debt against it are tracked independently, not netted together before they hit the balance sheet.
What counts as an asset
Cash and bank balances: checking, savings, and money market accounts
Investments: brokerage accounts, retirement accounts, and stock holdings
Real estate: your home and any other property, at current market value
Vehicles and valuables: cars, jewelry, and other items worth reselling
What counts as a liability
Mortgage balance: what's still owed on your home loan
Auto loans: the remaining balance on a financed vehicle
Student loans: outstanding education debt
Credit card balances: any revolving debt carried month to month
Positive vs. negative net worth
A positive net worth means your assets are worth more than your liabilities, you own more than you owe. A negative net worth means the opposite: your debts outweigh what you own, which is common early in adulthood, right after buying a home, or after taking on student loans. Net worth isn't fixed; it moves as asset values change, as debt gets paid down, and as new debt is taken on. Tracking it over time, rather than checking it once, is what makes it useful: a rising trend means you're building wealth, even if the number itself is still small or negative.
What counts as a high-net-worth individual
Financial firms generally use the term high-net-worth individual (HNWI) for someone with at least $1,000,000 in liquid, investable assets, which usually excludes the value of a primary residence. Above that, very-high-net-worth is typically $5,000,000 to $30,000,000, and ultra-high-net-worth is roughly $30,000,000 and up. There's no official legal threshold; these are industry labels used mostly by banks and wealth managers to segment clients and products, not a test anyone has to pass.
Why net worth matters
Net worth is the backbone metric behind most other financial goals. It's the foundation for a FIRE number, the basis lenders use to assess overall financial health, and the simplest way to tell whether your financial decisions are actually working, regardless of what your income looks like on paper. Unlike income, which resets every pay period, net worth compounds: pay down debt or grow investments, and it carries forward and builds on itself.
Want to calculate your own? Try the Net Worth Calculator to see where your assets and liabilities net out today.