What is net worth and why does it matter?
Net worth is the most complete measure of your financial health. It answers the question: if you sold everything you owned and paid off every debt today, how much would you have left? Unlike income — which measures what's coming in — net worth measures what you've kept and built. A high income with no savings or heavy debt can leave you with a low or negative net worth. A modest income invested consistently over decades can build significant wealth.
Tracking net worth over time (quarterly or yearly) is the single best way to measure financial progress. It captures savings, debt payoff, investment growth, and home equity all in one number. Two of its biggest levers have their own tools: grow the asset side with the 401(k) Calculator, and shrink the liability side with the Debt Payoff Calculator.
How to calculate net worth
The formula is simple: Net Worth = Total Assets − Total Liabilities.
- Assets: Use today's market value — not what you paid. For your home, check a recent Zillow estimate or comparable sales. For vehicles, use Kelley Blue Book. For investment accounts, use the current balance.
- Liabilities: Use the current payoff balance, not the original loan amount. This is what you'd need to pay today to eliminate the debt.
Liquid vs. total net worth
This calculator also shows your liquid net worth — assets you could access quickly (cash, investment accounts, retirement accounts) minus all debts, excluding real estate and vehicles. Liquid net worth matters because home equity and car value can't pay your bills in a crisis. A healthy emergency fund and liquid net worth give you options that illiquid assets don't.
Net worth benchmarks by age
These are rough medians — context and income matter far more than hitting a target number on a specific birthday. What matters most is that your net worth grows year over year.
- Age 30: ~1× annual salary
- Age 40: ~3× annual salary
- Age 50: ~6× annual salary
- Age 60: ~8× annual salary
Common mistakes & rules of thumb
Net worth is the single best scorecard for financial progress — assets minus what you owe. Measure it honestly:
- Rule of thumb: track net worth once a quarter. The trend line matters far more than any single snapshot.
- Rule of thumb: one popular benchmark (from The Millionaire Next Door) is expected net worth ≈ age × pretax income ÷ 10.
- Common mistake: counting a financed car or home at full value while ignoring the loan against it. List the asset and the debt so the number is real.
- Common mistake: padding assets with depreciating stuff — furniture, electronics, clothes. If you couldn't readily sell it, it barely counts.
- Common mistake: counting pretax retirement balances at face value. A dollar in a traditional 401(k) is worth less after the taxes you'll owe on withdrawal.
Frequently asked questions
What is net worth?
Net worth is total assets minus total liabilities — everything you own minus everything you owe. It's the single best snapshot of your financial position. Positive means assets exceed debts; negative means you owe more than you own (common early in life with student loans or a large mortgage).
What counts as an asset?
Any financial resource you own with monetary value: cash, checking and savings balances, brokerage and retirement accounts (at today's value), real estate (at today's market value), vehicle resale value, and other valuables. Always use current market value, not what you paid.
What counts as a liability?
Debts you owe: remaining mortgage balance, auto loan balances, total credit card balances owed, student loan balances, personal loans, medical debt, and any other money owed. Use the current payoff balance.
What is a good net worth?
Benchmarks vary by age and income. A common target: by 30, 1× salary; by 40, 3×; by 50, 6×; by 60, 8×. These are rough guides, not hard rules. Growing your net worth year over year is what matters most regardless of where you start.
Should I include my 401(k) in net worth?
Yes. Retirement accounts are assets you own and belong in your net worth. Some people also track a separate "liquid net worth" that excludes retirement accounts (to gauge short-term financial flexibility), but the standard net worth figure includes them.