What Net Worth Is and How to Calculate Yours in an Hour
Net worth is what you own minus what you owe. Learn what to count, how to value a home, car and retirement accounts, and work through a full example yourself.
Net worth is the single number that sums up your whole financial position. It is what you own minus what you owe. It isn’t a score, and it isn’t a judgement of how well you’re doing as a person. It’s a snapshot, and like any snapshot it’s most useful when you take another one later and compare.
This guide explains what goes into the number, how to value the awkward items, and walks through a complete example you can copy with your own figures. Set aside an hour, gather your statements, and you’ll have your first number by the end.
The formula
Net worth = total assets − total liabilities
- Assets are things you own that have a money value: cash, savings, investments, retirement accounts, your home, your car.
- Liabilities are what you owe: a mortgage, car loan, student loans, credit card balances, money borrowed from family.
If your assets are larger, your net worth is positive. If your debts are larger, it’s negative. A negative number is common, especially early in life or soon after taking on student loans or a mortgage with a small deposit. It’s a starting point, not a verdict.
What to gather
Before you start, collect the latest balance for each of these. Online banking is usually the fastest source.
- Every checking and savings account, including any you share with a partner.
- Investment and brokerage accounts.
- Retirement accounts (workplace plans, individual retirement accounts, pensions with a transfer value).
- Any cash you hold, if it’s a meaningful amount.
- Your home’s estimated value, and any other property.
- Vehicles.
- Every loan and card balance: mortgage, home equity line, car loans, student loans, personal loans, credit cards, buy-now-pay-later plans, medical payment plans.
Use the same date for everything if you can. Mixing a January bank balance with a March mortgage statement gives you a number that never existed.
How to value the tricky items
Cash and debts are easy: the balance is the balance. A few assets need judgement.
Your home
Use a conservative estimate of what it would sell for. Recent sales of similar homes nearby are a better guide than a hopeful listing price. Some people knock off 5 to 10 percent to account for the costs of selling. Whatever you choose, use the same method each time so changes in the number reflect real changes, not a new way of counting.
Vehicles
Use a used-car guide’s private-sale value, not what you paid. Cars lose value steadily, and your net worth should show that.
Retirement accounts
Count the current balance. Some people prefer to reduce pre-tax accounts by an estimated tax rate, because that money will be taxed when withdrawn. Either approach is fine if you’re consistent. If you’re unsure how your accounts will be taxed, that’s a good question for a tax professional, as the rules vary by country and change over time.
Things that usually don’t count
Furniture, clothes, electronics and most household goods are worth far less second-hand than you’d expect. Leave them out unless something is genuinely valuable and sellable, such as jewellery with an appraisal or a collector’s item. Including the sofa only inflates the number without telling you anything.
A worked example
Here’s a household with a home, two cars and a mix of debts.
Assets
| Item | Value |
|---|---|
| Checking account | $3,200 |
| Savings account | $8,500 |
| Workplace retirement plan | $42,000 |
| Individual retirement account | $11,000 |
| Home (estimated sale value) | $340,000 |
| Car 1 | $14,000 |
| Car 2 | $6,500 |
| Total assets | $425,200 |
Liabilities
| Item | Balance |
|---|---|
| Mortgage | $268,000 |
| Car loan | $9,800 |
| Student loan | $21,500 |
| Credit card | $2,300 |
| Total liabilities | $301,600 |
Net worth = $425,200 − $301,600 = $123,600
Notice what this tells you, and what it doesn’t. Most of this household’s net worth is in the home: $340,000 of value against a $268,000 mortgage gives $72,000 of equity. Their liquid money (checking and savings) is $11,700. A high net worth doesn’t mean plenty of spending money, which is why it’s worth looking at the pieces as well as the total.
Liquid and illiquid net worth
It helps to split the number in two:
- Liquid net worth: cash and assets you could turn into cash quickly without penalty, minus short-term debts like credit cards.
- Total net worth: everything.
In the example, liquid net worth is roughly $11,700 − $2,300 = $9,400. That’s the figure that matters if the car breaks down or a job ends. Total net worth is the long-term picture.
Common mistakes
- Forgetting small debts. A store card with $400 on it, a payment plan at the dentist. They add up.
- Using the purchase price. Your car isn’t worth what you paid, and your home may not be worth what a neighbour got at the top of the market.
- Double counting. If a savings account is earmarked for a goal, it’s still one account. Count it once.
- Comparing with strangers. Net worth depends on age, location, income and luck. The useful comparison is with your own number six or twelve months ago.
What to do with the number
Write it down with the date. Then do it again next month, or at least every quarter. One number tells you where you are. A series tells you which direction you’re going, and that’s what’s actually motivating.
Look at what moved it. Did paying down the card help? Did the retirement account fall with the markets? Did you finally stop counting the boat you sold last year? Each change is a small story about your money.
If your number is negative, focus on the trend rather than the sign. Moving from −$30,000 to −$24,000 over a year is real progress. If high-interest debt is the main reason, a non-profit credit counsellor or a qualified financial professional can help you plan a way down.
Keeping it up to date without a spreadsheet
A spreadsheet works fine for a few accounts. As the list grows, it gets tedious to update. Kemback’s overview shows your net worth from the accounts you track, and the net worth report charts it over time, so you can see the trend without retyping balances. Investment tracking (individual holdings and cost basis) isn’t in Kemback yet, so for now you’d record an investment account’s balance as you would any other account.
However you track it, the habit is what matters: same method, regular dates, and an honest look at what changed.
This article is general information, not financial, tax or legal advice. For decisions about your situation, talk to a qualified professional.
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