Intro: Your net worth, or what you own minus what you owe, shows a snapshot of your financial health. A low or negative number early on in your financial journey is normal, and what matters most is whether it’s trending in the right direction.

According to the Federal Reserve Board’s Survey of Consumer Finance, the median net worth of U.S. households is $192,900. If your number is lower (or negative), pay down debt, save consistently and invest what you can. Do that, and your net worth will likely move in the right direction.

• What is net worth?
• How do you calculate net worth?
• What if my net worth is negative?
• How can I grow my net worth?
• How do I track my net worth over time?
• FAQs about net worth

What is net worth?

Net worth is what you own minus what you owe: the total value of your assets (savings, investments, retirement accounts, your home and other property) minus your liabilities (everything you owe).

Your income isn’t part of that equation. Someone earning $50,000 a year who saves and invests consistently can end up with a higher net worth than someone earning $150,000 who spends most of it — net worth measures what you keep, not what you make. Because it reflects decisions made over years rather than a single paycheck, tracking it shows real progress: whether you’re actually paying down debt and building wealth, or just spending what comes in.

How do you calculate net worth?

To calculate your net worth, you’ll add up your total assets, add up your total liabilities and subtract your liabilities from your assets.

Step 1: Add up your assets

The first step is to add together all the things that have value. Examples include:

• Cash
• Banking and savings accounts
• Stocks and mutual funds
• Retirement and investment accounts
• Home value
• Vehicles
• Savings bonds
• Certificates of deposit (CDs)
• Other valuables, such as antiques, art and jewelry

Step 2: Add up your liabilities

After you’ve added the value of your assets, you’ll do the same with your liabilities. These are the amounts you owe, and may include:

• Mortgages
• Car loans
• Home equity loans
• Credit card balance s
• Personal loans
• Medical debt
• Past due bills
• Business loans
• Delinquent taxes
• Cash and payday loans

Step 3: Subtract

Next, subtract your total liabilities from your total assets. This will give you a number for your net worth. Here’s an example:

Next, add up the liabilities.

Finally, subtract liabilities from assets.

$40,000 − $25,500 = $14,500

In this example, the net worth is $14,500. 

What if my net worth is negative?

A negative net worth means your debts currently outweigh your assets right now. This is common if you’re paying off student loans, just bought a car or working on building savings. It’s not a verdict on your financial future.

Your net worth today reflects choices you’ve already made, not the ones you’re currently planning to make. To increase your net worth, consider paying down high-interest debt first and contribute to savings accounts even in small amounts.

How can I grow my net worth?

Your net worth can increase by investing, making and keeping more money, paying down debt and reducing expenses.

Invest

Investing lets your money grow on its own, which builds net worth without requiring you to save more from your paycheck. A few ways to get started:

• Max out tax-advantaged accounts first. Contribute enough to your 401(k) to get any employer match, then consider an IRA — depending on the account type, your money grows either tax-deferred (traditional) or tax-free (Roth).
• Open a taxable brokerage account once you’ve covered retirement accounts, for investing beyond those annual contribution limits.
• Automate your contributions so investing happens consistently, without relying on willpower each month.

Assets that grow in value increase your net worth directly. A retirement account that grows from $50,000 to $60,000 adds $10,000 to your net worth — no extra savings required, just market growth.

Pay down debt

Paying off debt reduces your liabilities, which increases your net worth by the same amount. When you pay off $5,000 in credit card debt, your net worth goes up $5,000, even if your income and savings haven’t changed at all.

Make more money

Increasing your income can help grow your net worth, too. More income only grows your net worth if you save or invest it rather than spend it — remember, income isn’t part of the net worth formula, only what you keep is. A raise, a new job or extra income from a side hustle can help, but only when that extra money goes toward savings, investments or debt payoff instead of new spending.

Cut down expenses

The less money you spend, the more you get to keep. Budgeting and cutting down expenses can increase the amount of cash available to you, which increases your net worth if you’re able to put it toward savings, investments and other assets.

How do I track my net worth over time?

Calculate your net worth at the same time each period (quarterly or yearly works well), so you’re comparing apples to apples. What matters isn’t the number itself, but the direction: if it’s climbing over time, your plan is working, even if the number is still small. If it’s flat or dropping, that’s a signal to revisit spending or debt.

Consider using Credit Karma’s Net Worth feature to track your net worth automatically over time.

Next steps

Calculate and log your net worth, then set a reminder to recalculate it in three to six months. Focus on one thing at a time: pay down a specific debt, automate a savings contribution or cut a recurring expense. The number will move. What matters is the direction.

The 50/30/20 rule can help prioritize savings by directing 50% of your take-home pay for needs, 30% for wants and 20% for savings or investments.

This budgeting approach can be effective in saving a portion of your money for the future while accounting for present expenses. We outline its advantages, steps to get started, alternative budgeting methods and how it can help you take control over your finances. 

• How to use the 50/30/20 rule in budgeting?
• What are advantages of using the 50/30/20 rule?
• What are some budgeting alternatives to the 50/30/20 rule?
• FAQs about the 50/30/20 rule

How to use the 50/30/20 rule in budgeting

To get a jump start on the 50/30/20 rule, four actionable steps include calculating how much you should be spending, comparing with your current spending, automating savings and investments and adjusting as needed.  

Step 1: Calculate how much you should be spending

Start with your take-home income and divide it out by the category percentages of needs, wants, and savings.  

If your take-home pay is $6,000 per month, you’ll find your percentages by multiplying by 50% (0.5) for needs, 30% (0.3) for wants and 20% (0.2) for savings. That works out as follows:

Net pay = $6,000

• Needs = $3,000
• Wants = $1,800
• Savings = $1,200

This is a rough estimate of how much to spend in each of the three categories, but it can be adjusted for differing life circumstances. Some examples of types of potential expenses could be: 

Needs: 50%

Budget 50% of your take-home pay for expenses that are considered essential needs. Examples include: 

• Housing
• Utilities
• Transportation
• Insurance
• Groceries
• Health care
• Childcare
• Debt repayment (minimum payment amount)

Wants: 30%

Budget approximately 30% of your take-home pay for expenses that may still be important to you but would be considered non-essential “wants.” Examples include: 

• Entertainment 
• Vacations
• Dining out
• Home and clothing
• Gym memberships
• Hobbies

Savings and investments: 20%

Budget approximately 20% of your take-home pay for savings and investments. These include:

• Retirement contributions
• Savings accounts
• Emergency fund
• Debt repayment above the minimum payment

Step 2: Compare with your current spending

To reach your goals, it’s helpful to know exactly how much you’ve been spending and in what categories. Take a look at your current spending and see where you’d want to adjust. Credit Karma’s Budget Calculator, or a similar budgeting tool, could be useful for this step. 

Step 3: Automate savings and investments

To ensure you’re meeting your 20% savings goal, set up automatic transfers to an investment or savings account. If you don’t have one, you can open one with a reputable brokerage or a beginner-friendly investing app.

Step 4: Review and adjust

Allow yourself some grace and flexibility to stick with the budgeting method through all the different seasons of your life. Compare against your savings and debt payoff goals and continue to adjust as needed. 

What are advantages of using the 50/30/20 rule?

Compared with other budgeting methods, the 50/30/20 rule offers simplified categories and tracking, separating needs from wants, freedom to spend on wants and wealth building. We’ll dive further into each below. 

• Simplified categories and tracking: Categorizing expenses into three categories is a simple way to track your spending. Other methods may have dozens of categories.   

• Separates needs from wants. The 50/30/20 rule aims to separate needs from wants. A budget skewing too far in one category may need to be adjusted.  

• Freedom to spend on wants. It may help to know you have the power in your budget to splurge freely spend on wants every now and then. This may help with sticking to a budget. 

• Builds wealth. The 20% designated for saving and investing is a true differentiator. You’ll build wealth and prepare for the future while accounting for present needs. 

What are some budgeting alternatives to the 50/30/20 rule?

The 50/30/20 rule is just one way to approach your budget. Some alternatives to the 50/30/20 rule include zero-based budgeting, the envelope method and a reverse budget.  

Zero-based budgeting

A zero-based budget accounts for every expense you have during the month. When your total expenses are subtracted from your income, you should get zero. With this method, you know exactly where every dollar is going, whether it’s for groceries or savings. 

Envelope method

The envelope budgeting method, also known as cash-stuffing, is physically budgeting by category via envelopes. If your monthly grocery budget is $600, you would place that amount in the envelope to be used throughout the month. When the next month rolls over, you would place another $600 in the envelope. 

Pay yourself first

Pay yourself first, also called reverse budgeting, is where you put aside savings or investments first, and then budget for the rest of your expenses. If your goal is to invest $1,000 every month, you would put aside that money first and then budget with the remainder. 

Next steps

The sooner you start using a budgeting method the sooner you’ll be able to take better control of your finances. Even if you don’t feel ready, the 50/30/20 tool is a simple approach to keeping your finances in check. With only three major categories to track, you don’t have to dig into the nitty-gritty as much as you would with a normal budget. 

You can always adjust the rule for your needs by changing the percentages to match your personal situation and financial goals, and if it isn’t working for you there are other budgeting options out there.

A foreign transaction fee is an extra charge — typically 1% to 3% — that some card issuers add when a purchase is made in a foreign currency or routed through a foreign bank. Foreign transaction fees might not seem like a big deal until you come home from traveling and see a bundle of charges you’re not expecting. They usually show up on your statement after travel — sometimes after an online purchase you didn’t expect.

• How do foreign transaction fees work?
• How much do foreign transaction fees cost?
• When will I be charged a foreign transaction fee?
• Which credit cards don’t charge foreign transaction fees?
• What other charges should I watch for abroad?
• How can you avoid foreign transaction fees?
• FAQs about foreign transaction fees

How do foreign transaction fees work?

When you make a purchase in a foreign currency, your card issuer converts it to U.S. dollars and then adds a fee — usually 1% to 3% of the converted amount. So if your dinner in Paris costs $100 and your card’s fee is 3%, you’ll see an extra $3 on your statement.

Your issuer often converts the charge to dollars at that day’s rate, applies the fee if your card has one, and posts both to your statement.

How much do foreign transaction fees cost?

If your card charges a foreign transaction fee, it typically ranges from 1% to 3%. Your exact rate is listed in your card’s terms and conditions. It might seem insignificant, but if you’re traveling internationally with a card that charges a foreign transaction fee, it can add up. Here are a few examples.

3% foreign transaction fee

• Hotel: $2,500 X 3% = $75
• Food: $1,000 X 3% = $30
• Souvenirs: $500 X 3% = $15

1% foreign transaction fee

• Hotel: $2,500 X 1% = $25
• Food: $1,000 X 1% = $10
• Souvenirs: $500 X 1% = $5

When will I be charged a foreign transaction fee?

You’ll be charged a foreign transaction fee at the time of the purchase by your credit card issuer, but not all credit cards charge a foreign transaction fee. To find out if your card does, check the “fees” section of the terms and conditions for your card.

If your card charges the fee, you’ll see a little extra when you swipe outside the U.S. You’ll sometimes even pay the fee when making purchases from within the U.S. if you make a purchase from an online retailer from overseas or when the purchase is routed through a bank that’s based outside of the U.S.

Which credit cards don’t charge foreign transaction fees?

Capital One doesn’t charge foreign transaction fees on any of its credit cards, and many travel cards skip the fee too. Beyond that, many travel rewards cards don’t charge foreign transaction fees, often charging an annual fee in exchange for perks like lounge access or travel credits.

Compare options for credit cards with no foreign transaction fees.

What other charges should I watch for abroad?

Foreign transaction fees aren’t the only fee you’ll need to watch out for while traveling abroad. Other costs to be aware of include exchange rates, dynamic currency conversions, ATM fees and cash advance fees.

• Exchange rate markups: The exchange rate you get won’t be the same everywhere you go. You can check the going rate with your card network’s own converter — Visa and Mastercard both publish theirs.
• Currency conversion: Merchants and ATMs may offer to charge you in U.S. dollars at their own exchange rate.
• ATM fees: When you withdraw money from an ATM, you’ll incur ATM fees from both the ATM and your bank. It can be a percentage of the amount withdrawn, similar to a foreign transaction fee. It can also be a flat fee, usually between $1 and $5. Some banks and brokerages reimburse out-of-network ATM fees — though reimbursement may not extend to international ATMs.
• Cash advance fees: Getting cash from your credit card can be expensive whether you’re traveling abroad or not. Add in foreign transaction fees and ATM fees, and it becomes a big cost to take cash from your credit card.

How can you avoid foreign transaction fees?

Get a card with no foreign transaction fees

The only sure way to avoid foreign transaction fees is to carry a card that doesn’t charge them. If you’re looking for a new card, start by comparing travel credit cards to find options that likely don’t charge foreign transaction fees. But if avoiding this fee is your primary concern, check the any card’s terms and conditions to be certain before applying.

Avoid a worse exchange rate

When a merchant abroad asks whether you’d like to pay in U.S. dollars or the local currency, choose the local currency. This won’t get you out of a foreign transaction fee, but it avoids dynamic currency conversion.

If you choose to pay in the local currency, though, your credit card network will handle the conversion, and often, your card network’s rate is usually closer to the market rate than the merchant’s.

Pay with cash

Paying with cash doesn’t come with foreign transaction fees. Before your trip, estimate how much cash you’ll need. Convert the money at your home bank and bring it with you. You can also bring your debit card for emergency cash withdrawals — just pick one that doesn’t charge a foreign transaction fee and has a wide ATM network.

What’s next?

Before an international trip, check whether your card charges foreign transaction fees. Purchases from home can trigger them if the retailer or its bank is outside the U.S. If your card does charge the fee, compare no-foreign-fee options before you go.