Foundations · 5 min read
Most people track their income. Fewer track their net worth. But net worth is the number that actually tells you whether your finances are moving forward — or just spinning in place.
In this post, you’ll learn exactly what net worth means, how to calculate yours in minutes, and why it’s the one number worth checking every few months.
What is net worth?
Net worth is simple: it’s what you own minus what you owe.
Assets are everything you own that has value — your bank accounts, investments, car, home, and anything else you could sell for money. Liabilities are everything you owe — credit card balances, student loans, car loans, your mortgage, personal loans. Subtract one from the other, and you have your net worth.
The Formula
What counts as an asset?
Assets include checking and savings accounts, investment accounts (brokerage, 401(k), IRA), the current market value of your home if you own one, your car’s resale value, and any cash or valuables you could realistically sell. Use today’s market value, not what you paid — your car has likely lost value since you bought it, and your home may have gained some.
What counts as a liability?
Liabilities are everything you owe: credit card balances, student loans, car loans, your mortgage balance (not the home’s value — just what you still owe the bank), medical debt, personal loans, and any other money owed to anyone.
A real-world example
Here’s what a simple net worth snapshot might look like for someone in their late 20s:
Numbers are illustrative examples only.
That $800 might look small — but it’s positive, and it’s a starting point. The goal isn’t a big number today. It’s to grow that number over time.
Why net worth matters more than income
Income tells you what’s coming in. Net worth tells you what’s staying. You could earn $100,000 a year and still carry a negative net worth if you’re spending everything and carrying heavy debt. On the flip side, someone earning $50,000 and consistently saving could be building real wealth year after year. The scoreboard is net worth — not salary.
Is a negative net worth bad?
Not necessarily — especially early in life. Student loans and limited savings make a negative net worth common in your 20s. What matters is the trend. Is your number going up every few months? Then you’re doing the right things. Staying flat or going down despite earning more? That’s the signal to look at your spending and debt.
The direction matters more than the number. A net worth moving from −$30,000 to −$22,000 over a year is a win — you’re heading the right way.
How often should you check it?
Every 3 months is the right rhythm for most people. Checking too often can feel discouraging — net worth doesn’t shift dramatically week to week. But quarterly gives you enough time to see real movement and make adjustments if needed. Track it in a simple spreadsheet, a notebook, or a free tool like NerdWallet’s net worth calculator.
Your action step for today
Open a blank spreadsheet or grab a piece of paper right now. List your assets in one column and your liabilities in another. Add them up and subtract. That number — whatever it is — is your starting point. Write it down and date it. In three months, check again. That’s how you start winning with money.
Keep building
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Sources: Federal Reserve, Survey of Consumer Finances, 2022 · CFPB (consumerfinance.gov) · NerdWallet
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