Key takeaways

• To calculate net worth, add up the current value of your assets, then subtract all outstanding debts and other liabilities from that total.
• Use current account balances and realistic resale values for assets, and count the full debt you owe rather than just monthly payments.
• Track your net worth quarterly to see how saving, spending, debt balances, and changes in asset values affect your financial progress.

Net worth can be a key indicator of your financial health. Understanding your net worth and why it changes can offer clarity into your finances and help you take the next steps toward achieving your financial goals.

How to calculate net worth

Net worth is calculated by adding up the total value of everything you own (your assets), then subtracting everything you owe (your liabilities).

A simple formula for calculating net worth is:

Net worth = total assets - total liabilities

Assets are anything you own that holds monetary value. There are financial assets such as cash and investments, and nonfinancial assets like property or vehicles.

Liabilities are obligations you must pay back to another person or party. The most common type of liability is debt, which includes loans and credit card balances.

1. Add up all assets

To calculate your net worth, begin by adding up the value of any financial and nonfinancial assets you own, including:¹

When adding your total assets, do not include your salary or future earnings. You should, however, include the full estimated value of any real estate or vehicles, even if you're still making payments.

2. Add up all liabilities

Second, add up any liabilities that apply to you, including:²

If you're paying off a mortgage or other installment loan, make sure to use your full outstanding debt balance rather than your monthly payments.

3. Subtract total liabilities from total assets

Finally, to calculate your net worth, subtract the total value of your liabilities from your total asset value. Having a positive net worth means that your total assets exceed any liabilities you may have. Conversely, a negative net worth may suggest that your overall liabilities, or debt, exceed your total assets.

What makes a net worth "good" depends on your financial needs and lifestyle. Empower data shows the average U.S. net worth for people in their 20s is $163,710 and peaks for those in their 60s ($1,747,349). However, focusing on consistent growth can be more beneficial than targeting a specific number.

Net worth calculation example

Consider this example, in which you have the following assets:

Your total asset value comes to $534,000, yet you also have the following liabilities:

The total value of your liabilities comes to $314,000.

Your net worth would then be: $534,000 - $314,000 = $220,000.

Why does net worth change?

Your net worth can change for a number of reasons. It can rise if you begin putting more money away into savings or retirement accounts or earn interest on your savings or experience growth in the value of your investments. The market value of any invested assets, such as stocks and bonds, may also fluctuate. This can cause your net worth to increase or decrease over time.

If you notice your net worth has shrunk, try not to panic. This can happen as you take out new loans, your physical assets (like vehicles) depreciate over time, or as you withdraw HSA funds to cover medical expenses. You may also see your spending go up as your income rises, a process called lifestyle creep. Any of these factors can contribute to changes in net worth. Fortunately, there are steps you can take to manage your money and reach your next financial milestone.

How to track and improve your net worth over time

There are several ways to improve your net worth, and consistent tracking can help identify what's working and what needs attention.

The goal is to minimize liabilities while growing your total asset value. Paying off the principal on any high-interest debt is one place to start. Maintaining an emergency fund may help cover unexpected expenses like medical bills or car repairs without relying on credit-card debt or loans. In general, allocating funds from each paycheck for savings is one way to build wealth. For those who invest, maintaining a diverse investment portfolio can be one component of a long-term investment strategy. Consider analyzing your monthly spending habits and cash flow to identify funds that can be allocated toward savings or investing.

Consistently monitoring your net worth can help identify changes in savings and investing, cash flow, and debt. Online financial tools allow you to connect your accounts and automatically track your net worth. At the same time, you can set and track your own financial goals, such as paying off debt or building your savings. Some individuals prefer to work with a financial planner who can help create personalized strategies for saving, investing, debt management, and other priorities. Mid- to high-net-worth individuals may also consider wealth management services that combine financial planning with ongoing investment management and estate planning.

If you decide to calculate your net worth on your own using a spreadsheet or other tools, consider doing so regularly, such as every quarter. This can help you better track changes and make adjustments when necessary.

The bottom line

Your net worth can be one key indicator of your financial health. A good net worth depends on your financial needs and lifestyle, and it may change over time due to a variety of factors. You can take advantage of online tools and calculators to consistently monitor your net worth for changes in savings and investing, cash flow, and debt. By creating a financial plan or working with a financial professional, you can take the next step toward growing your wealth.