Net worth: what it is and how it's calculated

Net worth

Net worth is the difference between everything you own (assets) and everything you owe (liabilities), valued at the same point in time.

Formula: Net worth = assets − liabilities

It's the single figure that best summarizes a personal financial situation, because it accumulates years of income, spending, debt and investing into one number you can compare against your own past.

Unlike salary, which only measures what comes in, net worth measures what stays. Two people with the same income can have opposite net worth depending on their savings rate and debt load.

Example

With $12,000 in accounts, $40,000 in funds, a home worth $230,000 and a $140,000 mortgage balance, net worth is $142,000.

Put it into practice

Related terms

Asset — An asset is anything of economic value you own: cash, investments, real estate, vehicles or loans made to others.
Liability — A liability is an outstanding payment obligation: a mortgage, personal loan, consumer credit, card balance or debt owed to someone else.
Liquidity — Liquidity is how easily an asset can be converted into available cash without losing value.

Bring it to your own numbers

netclariq applies these concepts to your real accounts, debts and investments, with simplified double-entry bookkeeping and without asking for your bank credentials.

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Educational content. netclariq does not provide financial, investment, tax or legal advice.