Key Takeaway: Your net worth is calculated by adding up your assets (everything you own outright) and subtracting your liabilities (everything you owe). The difference is your net worth.
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:
| Assets | What it’s worth |
|---|---|
| Cash | $20,000 |
| Banking and savings accounts | $3,000 |
| Retirement and investment accounts | $8,000 |
| Vehicle resale value | $9,000 |
| TOTAL | $40,000 |
Next, add up the liabilities.
| Liabilities | What you owe |
|---|---|
| Car loan | $6,000 |
| Credit card balance | $2,500 |
| Personal loan | $7,000 |
| Student loan | $10,000 |
| TOTAL | $25,500 |
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.
FAQs about net worth
Yes. Include your home’s full market value as an asset and your remaining mortgage balance as a liability. The difference between the two is your home equity, and it’s already reflected in your net worth once you’ve listed both. The same logic applies to retirement accounts: include the full current balance of your 401(k), IRA, or other retirement accounts as an asset, even though you may owe taxes on withdrawals later. Net worth counts what you have today, not what’s fully accessible to spend.
The formula for net worth is assets − liabilities = net worth.
No, your net worth is not the same as your income. Your net worth is the total value of all your assets minus your liabilities. Your income is what you earn on a yearly basis, and since you don’t keep all of what you earn, it’s not factored into the equation of your net worth.