Net worth

The total value of everything you own minus everything you owe, giving a snapshot of your overall financial position.

What it means

Net worth is what would be left if you sold all your assets and paid off all your debts. Assets include cash, investments, retirement accounts, a home and vehicles; liabilities include mortgages, student loans, car loans and credit card balances.

Net worth can be negative, which is common early in adulthood when student loans exceed savings. Because it is a snapshot, the trend over time usually matters more than any single number. Home and car values are estimates, so many people use conservative figures.

Formula

Net worth = Total assets − Total liabilities

Total assets = current value of everything you own
Total liabilities = balances of everything you owe

Example

Suppose you have a home worth $300,000, $40,000 in retirement accounts and $10,000 in savings, for $350,000 in assets. With a $200,000 mortgage and a $20,000 car loan, liabilities are $220,000, so net worth is $130,000.

How it’s used

Tracking long-term financial progress once or twice a year
Retirement and estate planning
Applying for some loans or investments that ask about assets and debts

Good to know

Recalculate on the same date each year to see a consistent trend.
Paying down debt raises net worth just as surely as saving does.

Educational information only, not financial, tax or legal advice. Rules, limits and rates change; check the IRS, your lender or plan, or a qualified professional before acting.