Net worth is calculated with a single subtraction: total assets − total liabilities = net worth. Add up everything you own at its current value — home, bank accounts, investments, retirement accounts, vehicles — then add up everything you owe — mortgage balance, car loan, student loans, credit card balances — and subtract the second total from the first. If you own $400,000 and owe $250,000, your net worth is $150,000. If you owe more than you own, your net worth is negative, which is common early in adult life and is a starting point, not a verdict. Experian’s definition is the standard one: net worth is what would be left over if you cashed out all your assets and paid off your debts.
Step by step
- Choose a date. Net worth is a snapshot, not a running total. Pick a day — the first of a month or a quarter works well — and value everything as of that day, so the number is comparable next time.
- List every asset at its current market value — what it would sell for today, not what you paid for it and not what you hope it will be worth.
- List every liability at its current payoff balance — the full amount still owed, not the monthly payment.
- Total each column and subtract. Assets minus liabilities. Write the date next to the answer; an undated net worth figure is useless for tracking.
That is the whole method. Everything else in this article is about the two lists — because the subtraction never goes wrong, but the lists often do. The Federal Reserve works through the same two lists in its own net worth flowchart, the diagram its survey interviewers use to make sure no asset or debt category is missed. The U.S. Department of Labor’s Savings Fitness balance sheet worksheet lays out the same exercise as a fill-in balance sheet — total assets, total liabilities, and net worth as the difference — if you want an official worksheet to work through rather than a blank page. The Consumer Financial Protection Bureau’s financial-empowerment toolkit teaches the identical personal balance sheet: what you own, what you owe, and the difference between them is the number.
What counts as an asset
An asset is anything you own that has a monetary value you could realise. The standard list, in the order most people hold them:
- Cash and bank accounts — checking, savings, money market accounts, cash itself. Valued at the balance on your chosen date.
- Retirement accounts — 401(k), IRA, and similar account balances, at their current statement value. One honest caveat: money in a traditional 401(k) or IRA has not been taxed yet, so you will not keep every dollar when you withdraw it. The standard calculation (including the Federal Reserve’s, below) counts the full balance; just know the figure is pre-tax.
- Investments — brokerage accounts, stocks, bonds, mutual funds, at current market value.
- Your home and other real estate — at a realistic current market value: what comparable homes are actually selling for, not the asking price of the most optimistic listing on your street.
- Vehicles — cars, motorcycles, boats, at resale value (what a buyer would pay), not replacement cost and not what you paid.
- Business equity — your ownership stake in a business, if it has a realisable value.
- Valuable personal property — jewellery, collectibles and similar items only if they have a genuine resale market and you would actually sell them. Most household contents — furniture, clothes, electronics — are worth so little second-hand that careful calculators leave them out entirely. Including them at purchase price is one of the classic ways to flatter the number.
Two things that feel like assets but are not:
- Income is not an asset, and it is not net worth. Your salary is a flow — money arriving over time. Net worth is a stock — what has accumulated at a moment. A high earner who spends everything can have a net worth near zero; a modest earner who saved for decades can be wealthy. This is the single most common confusion about the concept, and it is why a pay rise does not, by itself, change your net worth at all until some of it survives as savings.
- Future entitlements are usually left out. The standard calculation — and the Federal Reserve’s Survey of Consumer Finances, the source of the national benchmarks — excludes the capitalised value of defined-benefit pensions and future Social Security payments, because they are not balances you own or can sell. If you have a pension, your real position is stronger than your calculated net worth; note it alongside the number rather than inventing a value for it inside the number.
What counts as a liability
A liability is any debt or financial obligation you are required to repay, counted at its full outstanding balance:
- Mortgage balance — the amount still owed on the home, not the home’s value and not the monthly payment. (Count the home at full value on the asset side and the full mortgage here; counting home equity as the asset and then subtracting the mortgage again double-counts the debt and understates your net worth.)
- Auto loans — remaining balance, even if the car is now worth less than the loan. That gap is real, and the calculation is supposed to show it.
- Student loans — the full remaining balance.
- Credit card balances — the amount owed, including balances you intend to pay off this month. On your snapshot date, you owe it and the cash to pay it is still in your account on the asset side; the two cancel correctly only if both are listed.
- Personal loans, medical debt, tax owed, buy-now-pay-later balances — every obligation, however small or informal the payment plan feels.
What does not belong on this side: future living expenses, next month’s rent, or a loan you are thinking about taking. Liabilities are debts that exist on the snapshot date.
A worked example
Round numbers, one household, valued on a single date:
| Assets (what they own) | Value |
|---|---|
| Home (current market value) | $350,000 |
| Retirement accounts (401(k) and IRA) | $120,000 |
| Brokerage account | $30,000 |
| Savings and checking | $25,000 |
| Car (resale value) | $15,000 |
| Total assets | $540,000 |
| Liabilities (what they owe) | Balance |
|---|---|
| Mortgage | $240,000 |
| Car loan | $9,000 |
| Student loan | $18,000 |
| Credit cards | $3,000 |
| Total liabilities | $270,000 |
Net worth = $540,000 − $270,000 = $270,000.
Notice what the example shows. This household is a net-worth “270-thousand-aire” while having only $25,000 in the bank — most of its wealth is home equity ($110,000) and retirement savings it cannot easily spend. Net worth measures accumulated position, not cash on hand. Notice also how the number moves: paying $9,000 of savings toward the car loan leaves net worth unchanged (assets and liabilities both fall by $9,000) until the interest saved starts to accumulate, while the home rising $20,000 in value raises net worth by $20,000 without anyone saving a dollar. The number responds to markets as well as to behaviour, which is why its trend over years matters more than any single reading.
For scale: the Federal Reserve’s 2025 Survey of Consumer Finances put the median U.S. family net worth at $215,900 and the mean at $1,241,500 — the full breakdown is in average net worth by age, and where a given number ranks is in net worth percentile by age. Both use exactly the assets-minus-liabilities method above, applied to survey interviews with 4,367 families.
Net worth vs income vs credit score
Three numbers, three different questions:
| What it measures | How it is built | What it ignores | |
|---|---|---|---|
| Net worth | What you own minus what you owe, today | Your balance sheet: assets − liabilities | How much you earn; whether you pay bills on time |
| Income | Money flowing in over a period | Salary, business income, benefits, per month or year | What you keep; what you already owe |
| Credit score | How reliably you have handled borrowed money | Your credit reports: payment history, balances against limits, history length, new credit, mix | Your assets, savings and income entirely |
The credit score contrast surprises people most. A FICO Score contains no asset information at all — a person with $500,000 in the bank and a person with nothing can have identical scores, and a wealthy person who pays late can score worse than a low-income person who never misses. The two numbers also fail independently: net worth can be negative while a credit score is good (a new graduate with student loans who pays everything on time), and net worth can be high while a score is poor. If you need the other ruler, what is a good credit score sets out the FICO and VantageScore bands. Neither number substitutes for the other, and a lender may look at all three — score, income, and assets — for a single decision, as with a mortgage handled through escrow after approval.
The mistakes that distort the result
- Valuing assets at what you paid. A car bought for $30,000 is worth its resale value today. Purchase prices flatter almost every asset except a risen home.
- The double-counted mortgage. Home equity as the asset and the mortgage as a liability subtracts the debt twice.
- Forgetting small debts. Buy-now-pay-later plans, a store card, money owed to family — if it must be repaid, it belongs in the list.
- Counting the monthly payment instead of the balance. A $400 car payment is not a $400 liability; the remaining balance — perhaps $14,000 — is.
- ** Mixing dates.** Balances from January against a home value from June produce a number that is true on no day at all.
How often to recalculate
Once or twice a year is enough for most households, plus once after any large event — buying or selling a home, receiving an inheritance, taking on or clearing a major loan. The value of the exercise is the comparison: same method, same date each year, and the direction of travel becomes visible. Recalculating monthly mostly measures stock-market weather, not your behaviour, and can make a sound plan feel broken in a bad quarter. Whatever interval you choose, keep each dated result; a single net worth figure tells you where you stand, but only a series of them tells you whether you are getting anywhere.
Frequently asked questions
Can net worth be negative? Yes. If total liabilities exceed total assets, the subtraction produces a negative number. It is common among younger households — in the Federal Reserve’s 2025 survey calculation, the 10th percentile for families under 35 was about −$11,700. Negative is a position to move from, not an error in the arithmetic.
Does net worth include my house? In the standard calculation, yes — at full current market value as an asset, with the remaining mortgage counted in full as a liability. That is how the Federal Reserve’s benchmarks are built, so excluding your home makes your figure incomparable with published ones.
Is a pension counted in net worth? Account-based pensions (401(k), IRA) are counted at their balance. Defined-benefit pensions and future Social Security are excluded from the standard calculation, including the Federal Reserve’s, because they are payment promises rather than owned balances.
What is liquid net worth? A stricter variant you will meet on calculator sites. Where the standard calculation counts everything you own, liquid net worth counts only the assets you could turn into cash quickly — bank accounts, brokerage holdings, cash itself — and still subtracts your debts, leaving the home and other slow-to-sell assets out. There is no single official definition: different calculators draw the “quickly” line in different places, and some also strip out retirement accounts. So never compare a liquid figure from one page with a standard figure from another. They are answers to different questions — “what could I reach in a hurry?” versus “where do I stand overall?”
Does paying off a loan raise my net worth? Not on the day you pay it. Handing a lender $5,000 from your savings cuts your assets by $5,000 and your liabilities by $5,000, so the subtraction comes out the same. What changes is everything after that day: the interest you no longer pay stops quietly leaking out of the asset side, so the same income builds the number faster. Paying down debt is a net-worth strategy that works through interest avoided, not through the payment itself.
Is net worth the same as income? No. Income is a flow over time; net worth is a stock at a moment. Earning more raises net worth only to the extent that some of the extra income is kept as assets or used to reduce debts.
This article is general education about how net worth is calculated, not personal financial advice. The worked example is illustrative, with invented round numbers. National figures cited are from the Federal Reserve’s Survey of Consumer Finances 2025 (released October 9, 2026), checked November 2026.