Your net worth is the single most important number for tracking your overall financial health. It is simply everything you own (assets) minus everything you owe (liabilities). Here is how to calculate and interpret it.
Net worth = Assets - Liabilities. Assets are things you own that have value: cash, investments, real estate, retirement accounts, and valuable possessions. Liabilities are debts: mortgage, student loans, credit cards, and car loans.
Tracking your net worth over time tells you whether you are building wealth or losing ground. The goal is steady growth year over year.
Add up everything you own:
Add up everything you owe:
Net worth varies enormously by age, income, and location. The Federal Reserve reports the median US household net worth is about $192,000. Here are age-based benchmarks:
Growing net worth is simple in principle: increase assets and decrease liabilities.
A common rule of thumb is to have a net worth equal to 1x your salary by 30, 3x by 40, 6x by 50, and 8x by 60. These are benchmarks, not requirements — everyone's path is different.
Yes, your home equity (home value minus mortgage balance) is part of your net worth. However, since it is not liquid, also calculate your "liquid net worth" excluding home equity.
Yes, especially for young people with student loans or new mortgage holders. A negative net worth is common in your 20s and 30s. The goal is to trend positive over time.