How to Determine Your Net Worth

Net worth is the value of your assets minus your liabilities. In other words, it’s the difference between what you owe and what you own. Determining your net worth provides a clear picture of your financial situation, helping you make informed decisions and plan for your financial goals.

How to calculate net worth

Net worth is made up of two main ingredients: assets and liabilities. Assets are things you own that have value, such as bank accounts and real estate. Meanwhile, liabilities are what you owe, including credit card balances and loan debt.

By subtracting your assets from your liabilities, you can figure out your net worth. Read on to learn how to calculate your net worth step-by-step.

1. Make a list of your assets

The first step in determining your net worth is to make a list of your assets. These can be liquid assets, like cash, savings accounts or certificates of deposit (CDs), or illiquid assets, which may take longer to sell or convert to cash, such as real estate.

Assets may include:

• Cash, including the money in your checking and savings accounts
• CDs
• Real estate investments
• Retirement accounts, such as a 401(k), individual retirement account (IRA) or pension
• Other investment accounts
• Stocks and bonds
• Cars, RVs and boats
• Personal belongings (e.g., jewelry, artwork and collectibles)
• Furnishings and electronics

For business owners, assets may include inventory, accounts receivable, equipment and vehicles.

If your assets are worth more than your liabilities, it means you have a positive net worth. A positive net worth generally indicates good financial health.

2. Add up your liabilities

Now onto the less fun part: adding up your liabilities, or the money you owe. Your liabilities may include:

• Mortgage
• Second mortgage (HELOC or home equity loan)
• Credit card debt
• Student loans
• Personal loans
• Vehicle loans
• Medical and dental bills
• Unpaid taxes

If your liabilities are more than your assets, it means you have a negative net worth. Having a negative net worth may mean you’re struggling financially or are just scraping by.

The good news, though, is that there are steps you can take to improve your net worth, including paying off credit card debt and saving more money.

3. Calculate your net worth

Once you have a list of your assets and liabilities, you’re ready to calculate your net worth. The net worth formula is relatively straightforward:

Assets - Liabilities = Net Worth

Net worth example

To illustrate how the above net worth calculation could pan out, here's an example.

Let's say Olivia wants to feel more in control of her finances and decides the first step is to determine her net worth. She starts by listing out her total assets and liabilities:

The total value of Olivia’s assets are $370,000, and her liabilities are $127,000. Here’s her net worth calculation:

Formula: Assets - Liabilities = Net Worth

Olivia’s total assets: $370,000
Olivia’s total liabilities: $127,000

$370,000 - $127,000 = $243,000

Olivia’s net worth is $243,000.

Why is net worth important?

Determining your net worth provides a snapshot of your overall financial health. Generally, a higher net worth indicates stronger financial stability, while a lower net worth may signal that there are areas for improvement.

It also allows you to track your progress over time, helping you identify whether you’re improving financially or falling into a cycle of debt. Checking your net worth at least once a year is a good financial habit.

Ultimately, the goal is to grow your net worth as time goes on by reducing your liabilities, such as loans and bills, and increasing your assets, like savings and investments.

Frequently asked questions

Is a 401(k) part of net worth?

Yes, retirement accounts, including 401(k)s and IRAs, count as assets and should be included in your net worth calculation.

Does your house count as net worth?

Yes, your house counts toward your net worth. However, for an accurate calculation, you’ll want to list your home’s value as an asset and your mortgage balance as a liability. The difference between these two amounts is your home equity, which is a key component of your net worth.

What is not included in your net worth?

Generally, items without a monetary value shouldn’t be included in your net worth, such as:

• Degrees and skills
• Noncash employee benefits
• Sentimental items
• Life insurance – unless it has cash value