Net worth is the total value of everything you own, minus everything you owe. It's one number that summarizes your overall financial position at a point in time.
The formula
Net worth = Assets − Liabilities
What counts as an asset
- Cash in checking and savings accounts
- Investments (retirement accounts, brokerage accounts)
- Real estate you own
- Vehicles (usually at their current resale value, not what you paid)
- Other valuable property
What counts as a liability
- Mortgage balance
- Car loans
- Student loans
- Credit card balances
- Any other money you owe
Why net worth matters more than income
Income measures money coming in; net worth measures what you've actually kept and built over time. Someone earning a high salary but spending all of it (or more, via debt) can have a lower net worth than someone earning less but saving consistently. Tracking net worth over months and years shows whether your financial decisions are actually moving you forward, regardless of what your paycheck looks like.
How often to check it
Once a month or once a quarter is usually enough — net worth is meant to show a trend over time, not something to obsess over daily, especially since investment values can swing day to day without reflecting any real change in your financial habits.