What is Net Worth?
Net Worth = Assets - Liabilities. In other words: everything you have minus everything you owe. It’s the most important number in your personal finances — it shows your real wealth.
How to calculate?
Your Assets (what you have)
- Money in account and investments
- Real estate (market value)
- Vehicles (market value)
- Other valuable assets
Your Liabilities (what you owe)
- Mortgage (outstanding balance)
- Vehicle financing
- Personal loans
- Credit card (open bill)
- Other debts
Example
| Assets | Value |
|---|---|
| Investments | $10,000 |
| Real estate | $60,000 |
| Car | $8,000 |
| Total Assets | $78,000 |
| Liabilities | Value |
|---|---|
| Mortgage | $40,000 |
| Car financing | $5,000 |
| Total Liabilities | $45,000 |
Net Worth = $78,000 - $45,000 = $33,000
Why track
- Shows if you’re getting richer or poorer
- Allows setting concrete goals (e.g. “I want $200,000 in net worth”)
- Reveals if your debts are under control
- Is more important than salary (high income with high debts = low net worth)
Net Worth goal by age (reference)
- 30 years: 1x your annual salary
- 40 years: 3x your annual salary
- 50 years: 6x your annual salary
- 60 years: 8x your annual salary
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