How to Calculate Net Worth
Net worth is calculated by subtracting total liabilities from total assets.
How the math works
Net worth is total assets minus total liabilities at a single point in time — it's a snapshot, not a rate, which is why tracking it monthly or quarterly (rather than reading one number in isolation) is what actually shows financial progress.
Worked example
Assets of $180,000 (home equity, retirement accounts, cash, vehicle value) minus liabilities of $145,000 (mortgage balance, car loan, credit cards) gives a net worth of $35,000. If liabilities fall by $6,000 next year with assets flat, net worth rises to $41,000 even with no new saving.
What to watch for
- Home and vehicle values are estimates, not guaranteed sale prices — overvaluing them inflates the number artificially
- Retirement account balances shown are usually pre-tax, so the spendable value is lower than the listed figure
- A single snapshot means little — the trend over several checkpoints is the useful signal
Practical takeaway
Recalculate net worth on a consistent schedule (e.g., quarterly) using the same method each time so the trend, not the single number, guides your decisions.