Income tells you how much money flows in. Net worth tells you how much you’ve actually kept. Plenty of high earners have little to show for it, and plenty of modest earners quietly build real wealth. Net worth is the scoreboard that shows the difference.
The formula
Net worth = total assets − total liabilities
That’s it. The work is in listing everything honestly.
Step 1: List your assets
- Cash: checking, savings, CDs, money market accounts
- Retirement accounts: 401(k), 403(b), IRAs, HSAs
- Taxable investments: brokerage accounts, crypto
- Real estate: your home and any other property at a realistic market value
- Vehicles: at what you could actually sell them for today
- Business ownership, if you can value it reasonably
- Other valuables you could sell, like jewelry or collectibles — be conservative
Skip everyday household stuff. Your couch and clothes are worth far less than you paid, and including them inflates the number without telling you much.
Step 2: List your liabilities
- Mortgage and home equity loans
- Car loans
- Student loans
- Credit card balances
- Personal loans and medical debt
- Money owed to family or friends
- Taxes you owe
Step 3: Subtract
Here’s an example for a couple in their early 30s:
- Assets: cash $12,000 + retirement $68,000 + home $360,000 + cars $18,000 = $458,000
- Liabilities: mortgage $290,000 + car loan $11,000 + student loans $24,000 + card $2,500 = $327,500
- Net worth: $130,500
Negative net worth is normal early on
Many people start their careers with student loans and little savings, so a negative number is common. What matters is the direction. Going from −$40,000 to −$25,000 in a year is real progress.
How to track it
- Use a simple spreadsheet with a column for each date.
- Update it once or twice a year, or quarterly if you enjoy it. Monthly can make normal market swings feel dramatic.
- Use the same valuation method each time so the trend is meaningful.
Ways to grow your net worth
There are only two levers: increase assets or decrease liabilities.
- Pay down high-interest debt — use the avalanche or snowball method.
- Capture your 401(k) match and invest consistently in low-cost funds.
- Spend less than you earn — a framework like 50/30/20 helps.
- Avoid lifestyle creep when income rises.
- Be careful with depreciating assets like expensive cars bought with long loans.
Comparing yourself to others (carefully)
The Federal Reserve’s Survey of Consumer Finances publishes median net worth by age group. It can be interesting context, but medians hide huge variation, and your situation — where you live, when you started, family support — matters more than any benchmark. Curious about the top end? We looked at what percentage of Americans are millionaires.
Net worth and insurance
As your net worth grows, so does what you could lose in a lawsuit. That’s when liability protection like an umbrella policy becomes worth considering.
Bottom line
Add up what you own, subtract what you owe, and write the number down. Then do it again in six months. Watching that number trend upward is one of the most motivating things you can do for your finances.
