Net worth
How to calculate your net worth and why it matters more than your salary
Your salary tells you how much you earn, but not how much you have. Net worth — what you own minus what you owe — is a far more honest indicator of your real financial situation.
What net worth actually is
Net worth = assets (everything you own) − liabilities (everything you owe). A high salary with a lot of debt can produce a low or even negative net worth; a modest salary with no debt and some savings can produce a solid, positive net worth. It's the number that actually sums up your situation.
What counts as an asset
Checking and savings accounts, investments (funds, stocks, pension plans), the market value of your home if you own it, vehicles (at their real resale value, not what you paid), and any other asset of meaningful value.
What counts as a liability
Any outstanding mortgage, personal or car loans, outstanding credit card balances, and any other debt. Always use the current outstanding balance, not the original loan amount.
Why to calculate it regularly
A single snapshot of your net worth says little on its own; what's useful is calculating it every 6 to 12 months and watching the trend. If it rises over time, even slowly, you're heading in the right direction, even if the number itself is still small or negative.
Common mistakes when calculating it
Overvaluing your home or car based on what you "think it's worth" instead of a realistic market price. Forgetting small debts (a credit card balance, a loan between family members) that still count. Comparing your net worth to other people's — the useful comparison is with yourself over time, not with someone else.
Frequently asked questions
Is it normal to have negative net worth?
Yes, it's very common, especially early in adult life (studies, a first car, the early years of a mortgage) or right after buying a home. What matters is the trend: that it improves over time, not the figure at any one moment.
Should I include my pension plan?
Yes, it counts as an asset, even though it's money you can't access until retirement — it's still part of your net worth, just with less liquidity than a checking account.
How do I value my home if I haven't had it appraised?
A reasonable estimate based on recent sale prices of similar homes in your area is enough for this calculation — you don't need an official appraisal, which is only needed for an actual transaction (a sale, a mortgage).
How often should I recalculate it?
Every 6-12 months is enough to see a real trend without obsessing over short-term swings in the value of your investments or your home.
Put it into practice
Add up your assets, subtract your debts, and visualize how your net worth breaks down: