What you own minus what you owe. How to calculate it and the three things it tells you beyond the total.
Key findings
- Net worth = what you own − what you owe. In the example, 135,000.
- Only 35,000 is liquid: a house does not pay for emergencies.
- Debts add up to 54% of what you own. What helps is tracking it every year.
What net worth is
Your net worth is everything you own minus everything you owe. It is the figure that best sums up your finances: income tells you how much comes in each month; net worth, how much you have built.
How to calculate it
Add up your assets at today's value (accounts, investments, home, car…) and subtract your debts (mortgage, loans, cards). A hypothetical example:
| What you own | What you owe | ||
|---|---|---|---|
| Accounts | 15,000 | Mortgage | 150,000 |
| Investments | 20,000 | Loan | 8,000 |
| Home | 250,000 | Cards | 2,000 |
| Car | 10,000 | ||
| Total | 295,000 | Total | 160,000 |
Net worth is 135,000. But the figure alone does not tell the whole story.
Three things to look at beyond the total
- Liquidity. Of the 295,000, only 35,000 (accounts and investments) can be used quickly. A house does not pay for emergencies.
- Debt. Debts add up to 54% of what you own. That is not bad in itself, especially if most of it is the mortgage on your home, but it makes you more vulnerable if prices or your income fall.
- The trend. What helps is working it out once or twice a year and seeing whether it rises. If your net worth does not grow, either you spend what you earn or your debts grow at the same pace.
How to grow it
- Pay off expensive debts such as cards first: every amount you repay raises your net worth.
- Save a fixed share of your income and invest it for the long term.
- Value assets cautiously: a car loses value every year, and your home is worth what someone would pay for it, not what it cost you.
Work out yours with the net worth calculator. If your debts weigh heavily, start with the snowball vs avalanche calculator.