Net Worth: What Is It and How To Calculate It

The definition of net worth is extremely straightforward if you understand the definition of its components. If you don’t, don’t worry I’ll explain it for you.

Net Work = Assets – Liabilities

I’ll admit as an accounting major this seems extremely simple to me but  I understand that a lot of people rarely come across these terms and don’t know their formal definitions. Let’s get started.


Assets are things that you own that have value including things that you can sell to get money. Some examples of assets are cash, certificates of deposits, stocks, bonds, real estate, cars, jewelery and other items of value. Typically though I only include those items for calculating my net worth.

The definition of assets also includes many more items. Furniture, computers, cell phones, appliances and TVs can also be considered assets but their values often begin to diminish rapidly so I don’t  include them in my calculations.


Liabilities are what you owe other people and institutions. Credit card debt, car loans, mortgages, personal loans, student loans and other forms of debt that you owe to someone else. Anything you owe to anyone should likely be considered a liability.

Net Worth

Add up all of your assets and add up all of your liabilities. Then subtract your liabilities from your assets. What is left over is your net worth or how much money you would have if you sold all of your assets today and paid off all of your liabilities (debt) with the proceeds.

Now realistically I know that you’ll never sell all of your assets and pay off all of your liabilities in the same day. If your net worth is negative it wouldn’t even be possible! So why do I think net worth is important?

Net worth is a benchmark that you can measure your progress. The more assets you accumulate the better off you are in general. I say in general because if you’re a hoarder chances are what you consider “assets” most people probably consider junk… just sayin’.

Some Things to Keep in Mind

Make sure to revisit the value of your assets every once in a while. Your car is going to go down in value with every month and mile that passes. To get an accurate value for my car I use the Kelly Blue Book private party value.

If you own a house it is often difficult to value it. Use your best guess but try not to over estimate. I use Zillow to come up with estimate but understand that it may not work well in your area.

Net worth can fluctuate rapidly if you hold a lot of investments and the market is making big moves every day. Try not to get too upset if your net worth goes down a lot one month or excited if it skyrockets. Over time with some effort your net worth should grow if you are spending less than you earn, are paying down debt and/or are investing.

I track my net worth monthly. I wouldn’t suggest you track it any more often than that. I use a basic spreadsheet to keep track of it and just change the numbers. Here is an example of a spreadsheet you can use.

Do you calculate your net worth? If not, why not? If so, how often? How do you track it?

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About Lance Cothern

Lance Cothern, a Certified Public Accountant (CPA) licensed in the Commonwealth of Virginia, is the founder of Money Manifesto. You can read more about him here or connect with him on Facebook, Twitter, Google+ or Pinterest.


  1. I have never calculated my net worth, but I think I will give it a go just for fun! I guess it would also be a good tool to help with goal setting.
    Jon Rhodes recently posted..Comment on How To Get More Blog Comments by jonrhodesukMy Profile

  2. I haven’t calculated it mainly because I know it’s going to be in the red and I’m not really looking forward to seeing that. I know I will eventually but that’s going to be a ways off.
    bogofdebt recently posted..Firday’s Link LovingMy Profile

  3. We’ve been tracking our net worth since 1998, first through Quicken and now through iBank (after Intuit shafted Mac users post-Lion update). These systems produce graphs for any time increment you like–monthly, quarterly, yearly. It’s fun to look back on 15 years worth of data and correlate the ups and downs with external and internal events. I think tracking net worth is important because “consuming” it plus whatever passive and pension income one may have in retirement will dictate standard of living.
    Kurt @ Money Counselor recently posted..American Family Money StatusMy Profile

  4. We use Quicken to track our finances and it also tracks our networth. We have an update all the time which is great. I love seeing it go up.
    Miss T @ Prairie Eco-Thrifter recently posted..Keeping it Simple: Strategies for Financial SecurityMy Profile

  5. For the blog I do keep track of my net worth on a monthly basis. However, I typically recommend that my clients update it every 3-6 months.

    It’s tough to keep track of it monthly because there could often be large swings, especially if you have a lot of investments and the stock market is going haywire.

    So, updating less often gives you a better idea of how you’re doing in the overall picture. With that said, it’s important to do because it is your financial report card. If your net worth is trending down then you’re obviously not headed in the right direction.
    Jason @ WSL recently posted..Yakezie Blog Swap: What’s Your Worst Money Mistake?My Profile

  6. I track my net worth often, but I don’t obsess about it. Plus, I don’t count my car as an asset since my parents bought it for me. I don’t know, maybe I feel like it isn’t really mine. I like to just keep track of my cash and investments as assets (and my future property if I buy one) and then the minimal monthly debt that I pay off each month. My net worth is in the positive right now, so I like it a lot and I don’t stress out about the fluctuations.
    From Shopping to Saving recently posted..Blog Swap! My Biggest Money MistakeMy Profile

  7. I calculate my net worth when I need it for some form. Normally, I do not think about my net worth too much. For me, it is a benchmark or a measurement of success and I use it to let me know how I am doing.
    krantcents recently posted..Friday Night Links: Kindle EditionMy Profile

  8. My networth is almost my religion. In fact I designed a spreadsheet and calculate in every three months – and plot it on a graph. Fascinating exercise. BTW, some formulae include pension funds in ‘assets’ – I do as well because the payout is ‘on its way’ and it will be left if I go.
    maria@moneyprinciple recently posted..Do you really need insurance?My Profile

  9. I’ve done this in the past, but only at the beginning of the year so I don’t obsess. I also took retirement accounts off Mint and only look at the quarterly statements–I sleep better at night and the money grows just the same.
    Brent Pittman recently posted..Help the Economy and Start Tipping MoreMy Profile

  10. This reminds me of my economics classes a year back. Haha.
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  11. @Jon – It is a great tool for goal setting

    @bog of debt – Even though it is negative now your goal could be to get it to zero!

    @Kurt – I use quicken but not for my net worth. I don’t use the auto update because I have quicken 2005.

    @Miss T – Watching it go up is a ton of fun!

    @Jason – 3-6 months is a good goal. You can do it monthly as long as you understand that investments can vary a lot month to month and not freak out and sell.

    @Shopping to Saving – It is still an asset though because you could sell it and keep the money. To each their own.

    @krantcents – As long as you know you’re net worth is going up do whatever works for you.

    @Maria – That is a great point. If you have a guaranteed pension you should definitely include it.

    @Brent – It is good not to obsess because there can be big swings due to the current events and investments

    @Fahad – Yup, this could definitely remind someone of economics.

  12. I calculate it but I don’t really think too much of it. As long as it’s positive, and I’m on track, then I’m happy.
    Michelle recently posted..My Biggest Money Mistake!My Profile

  13. I calculate my net worth on an ongoing basis, through I have all my financial accounts linked up there and have my other assets, like my car, manually entered in there (and I keep it updated with values). This enables me to know where my net worth is at on a monthly basis and whether it is going up or down. Great post.
    Kraig @ Young, Cheap Living recently posted..How to Handle Stress at WorkMy Profile

  14. Nope, I have never done the calculation because I already have the idea how much I’m worth, but this time could be different. Seems like a challenge to find out my net worth.
    Amy Turner recently posted..Disney Premier Visa Worth It?My Profile

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