Net Worth, Explained: How to Calculate Yours

A budget tells you where this month’s money is going. Net worth tells you where all of it has gone so far: the sum of everything you’ve saved, borrowed, bought and paid off. It’s one number, and once you know how to calculate it, it becomes one of the clearest ways to see whether your finances are heading in the right direction.

This guide explains what net worth is, walks through calculating yours with a worked example, and covers why it matters and how often to look. It’s general education, not financial advice.

What net worth means

Net worth is simple arithmetic:

Net worth = assets − liabilities

The Federal Reserve defines it the same way: the difference between a family’s assets and its liabilities.¹

• Assets are things you own that have money value: cash in checking and savings, retirement accounts, investment accounts, the value of your home, your car, and anything else you could sell.
• Liabilities are what you owe: a mortgage, car loan, student loans, credit card balances, personal loans, medical debt and money you’ve borrowed from family.

Net worth is a snapshot. It describes one day. Tomorrow it will be slightly different as balances, prices and debts change.

It’s also different from income. Someone can earn a high salary and have a low or negative net worth, and someone with a modest income can build a high one over years of steady saving. Income is what flows in; net worth is what’s left standing.

How to calculate yours in four steps

You need about half an hour and your most recent statements.

1. List your assets. Write down every account and anything valuable you own, with today’s value. Use current balances for accounts and a realistic sale price for property.
2. List your liabilities. Write down every debt with its current balance, the amount you’d need to pay it off today, not the monthly payment.
3. Add up each column.
4. Subtract total liabilities from total assets.

A worked example

Here’s an example for a household with a home, a car and some student debt:

Assets (example)	Value
Checking	$3,200
Savings	$8,500
Retirement account	$42,000
Home (estimated sale value)	$310,000
Car (estimated sale value)	$14,000
Total assets	$377,700

Liabilities (example)	Balance
Mortgage	$248,000
Car loan	$9,500
Student loans	$21,000
Credit card	$1,800
Total liabilities	$280,300

Net worth: $377,700 − $280,300 = $97,400.

Notice what the example shows. The home is the largest asset, but most of it is offset by the mortgage; the equity is $62,000. The car is worth more than its loan, so it adds $4,500. The student loans have no matching asset, so they pull the total down.

Tips for getting the numbers right

• Use sale value, not purchase price. A car bought for $30,000 might sell for half that a few years later. Online valuation tools and recent local sales give a reasonable estimate for vehicles and homes.
• Be conservative with your home. Selling costs money, so some people knock a percentage off the estimate to reflect that. Whatever you choose, use the same method every time.
• Skip everyday belongings. Furniture, clothes and electronics usually sell for far less than you paid. Many people leave them out unless something is genuinely valuable, like jewelry or a collection.
• Use the full balance of every debt. Include card balances even if you pay them in full each month, because on the day you measure, you owe that money.
• Retirement accounts count, but remember they may be taxed when you withdraw, so their spending power is lower than the balance.

How your number compares

It’s natural to wonder how your number stacks up. The Federal Reserve’s Survey of Consumer Finances is the main source for this. In its most recent edition, covering 2022, median family net worth was $192,900, while the mean was $1,063,700.¹ The mean is so much higher because a small number of very wealthy families pull the average up, which is why the median is the more useful comparison.

Age matters a great deal. In the same survey, median net worth for families headed by someone younger than 35 was $39,000.¹ Net worth tends to rise with age as people pay down debt, build retirement savings and build equity in a home.

Treat comparisons lightly. Where you live, when you started working, whether you have student debt and whether you own a home all shape the number. The comparison that matters most is you against yourself a year ago.

Why net worth matters

Net worth is useful because it catches things a budget can miss.

• It shows whether debt is really shrinking. Paying down a loan while adding to a card balance can feel like progress but leave you in the same place. Net worth shows the net effect.
• It shows whether saving is adding up. A budget can look fine month to month while savings quietly get spent on one-off costs. A net worth that rises over the year tells you the plan is working.
• It separates spending from buying things that hold value. Paying down a mortgage principal moves money from cash to home equity, so net worth barely changes. A vacation reduces it. Both can be good choices; net worth just shows them honestly.
• It helps with bigger decisions. Whether you’re weighing a home purchase, a career change or a large expense, knowing your full picture makes the tradeoffs clearer.

If your net worth is negative

A negative net worth is common, especially in your twenties or after a big loan. It’s not a verdict on how you handle money. It simply means you owe more than you own right now.

The path forward is the same as for anyone: spend less than you earn, put the difference toward debt or savings, and let the number climb. If you’re working through debt, the debt snowball and avalanche methods are two ways to choose the order. If card balances are the main drag, see how to pay off credit card debt.

Even while the number is below zero, watching it move toward zero can be encouraging. A change from −$18,000 to −$12,000 over a year is real progress.

How often to check

For most people, monthly or quarterly is enough. Investment balances move every day, and checking weekly mostly shows short-term noise. A few simple habits help:

1. Pick a fixed date, such as the first of the month or the first of each quarter.
2. Use the same method each time, especially for home and car values, so changes reflect reality, not a new way of estimating.
3. Compare over longer periods. Look at this quarter against the same quarter last year, not just last month.
4. Write down one line of context, like “paid off car loan” or “market dip”, so you remember what drove the change.

A spreadsheet with one column per date works well. Over a few years it turns into a clear record of your progress.

How net worth fits with your budget

Your budget and your net worth work together. The budget is where you decide what happens to each paycheck: bills, spending, savings and extra debt payments. Net worth is where you see the results of those decisions accumulate.

If you want to raise your net worth, the levers are usually in your monthly budget: a steady savings rate, an emergency fund that keeps surprises off credit cards, and a plan for any debts you carry.

In Aurelo: Aurelo’s budget covers the monthly side: pockets for bills, needs and wants, savings goals, and debt pockets for loans you want to track. Net Worth is part of Aurelo Gold, alongside Forecast and the Payoff Plan, which shows a debt-free date. Everything that decides where each month’s money goes, including savings goals and a debt pocket made by hand, is on the Free plan.

Start with a first reading

You don’t need perfect numbers to begin. Pull your balances together, make reasonable estimates for your home and car, and write down the result with today’s date. That first reading is your baseline. The next one, a month or a quarter from now, will start to show you which way you’re heading.