The One Number That Reveals Your Financial Truth
Net worth is the ultimate financial scorecard: what you own minus what you owe. Unlike income, which measures flow, net worth measures accumulated wealth. It's the single best indicator of whether your financial decisions are building wealth or eroding it.
The High-Income Trap
This calculator helps you aggregate all assets and liabilities into a single number, track progress over time, and benchmark against age-appropriate targets.
Understanding the Net Worth Formula
The Formula
Positive net worth means you own more than you owe. Negative net worth means debts exceed assets—common early in life but a warning sign if persistent.
What Counts as Assets
| Asset Category | Examples | How to Value |
|---|---|---|
| Cash & Savings | Checking, savings, money market, CDs | Current balance |
| Investments | Brokerage, stocks, bonds, ETFs, crypto | Current market value |
| Retirement | 401(k), IRA, Roth IRA, pension | Current balance |
| Real Estate | Primary home, rental property, land | Estimated market value |
| Vehicles | Cars, motorcycles, boats, RVs | Current resale value (KBB) |
| Other | Business equity, collectibles, jewelry | Conservative estimate |
What Counts as Liabilities
| Liability Category | Examples |
|---|---|
| Mortgage & HELOC | Primary home loan, home equity lines |
| Auto Loans | Car loans, RV loans, boat loans |
| Student Loans | Federal and private education debt |
| Credit Cards | All outstanding credit card balances |
| Personal Loans | Bank loans, 401k loans, family loans |
| Other Debt | Medical debt, back taxes, legal judgments |
Use Realistic Values
Net Worth Benchmarks by Age
Based on the Federal Reserve's Survey of Consumer Finances, here are typical net worth ranges (2022 data):
| Age Group | Median Net Worth | Top 25% | Top 10% |
|---|---|---|---|
| Under 35 | $14,000 | $75,000 | $250,000+ |
| 35-44 | $91,000 | $250,000 | $600,000+ |
| 45-54 | $168,000 | $500,000 | $1.2M+ |
| 55-64 | $213,000 | $700,000 | $1.6M+ |
| 65-74 | $266,000 | $850,000 | $2.0M+ |
| 75+ | $254,000 | $750,000 | $1.8M+ |
Focus on Your Trajectory
Alternative Benchmark Formula
A popular rule of thumb from The Millionaire Next Door:
Expected Net Worth
A 40-year-old earning $80,000 should have net worth of approximately $320,000. This is a stretch goal; many fall short.
Net Worth Growth Phases
Negative Net Worth Phase
Common for young adults with student loans or new homeowners. Focus on:
- Paying down high-interest debt aggressively
- Building a $1,000 starter emergency fund
- Capturing employer 401(k) match (free money)
- Tracking progress monthly for motivation
Building Phase ($0 to $100K)
The hardest phase—compound growth hasn't kicked in yet. Focus on:
- Eliminating remaining high-interest debt
- Building 3-6 month emergency fund
- Maximizing retirement contributions (at least 15%)
- Starting taxable investment account if maxing retirement
Growth Phase ($100K+)
Compound growth accelerates. At 7% returns, $100K grows to $200K in ~10 years even without new contributions. Focus on:
- Maximizing all tax-advantaged accounts
- Diversifying investments appropriately
- Tax optimization (asset location, harvesting)
- Protecting wealth with proper insurance
- Considering real estate if appropriate
How to Increase Net Worth
- Pay off high-interest debt (credit cards first—guaranteed 20%+ 'return')
- Increase income through career advancement, side hustles, or new skills
- Reduce expenses and invest the difference (not just save—invest)
- Invest consistently in low-cost index funds (S&P 500, total market)
- Avoid lifestyle inflation as income grows (save raises, not spend them)
- Build equity in appreciating assets (home, business, investments)
- Protect against setbacks with insurance and emergency funds
Frequently Asked Questions
Q: Should I include my car as an asset?
A: Yes, but use its current resale value (check Kelley Blue Book or Edmunds). Cars depreciate rapidly, so update this value annually. Don't use purchase price or loan balance—use what you could actually sell it for today.
Q: How often should I calculate net worth?
A: Monthly or quarterly tracking is ideal for most people. More frequent checks can cause anxiety over short-term market fluctuations. Less frequent updates miss important trends. Pick a schedule and stick to it.
Q: Should I include my home in net worth?
A: Yes. Include your home's current market value (use Zillow estimate or recent comparable sales) as an asset, and your mortgage balance as a liability. The difference is your home equity. Update annually.
Q: What if I have a negative net worth?
A: Don't panic—it's common for young adults with student loans or recent home buyers. Focus on paying down high-interest debt and building income. Track monthly progress; the trend matters more than the absolute number.
Q: Why is net worth better than income as a wealth metric?
A: Income measures cash flow; net worth measures accumulated wealth. A $200K earner spending $210K has declining wealth despite high income. Net worth reveals whether you're actually building wealth or just moving money.
Q: Should I count retirement accounts even though I can't access them?
A: Absolutely. Retirement accounts (401k, IRA) are among your most valuable assets. Include the current balance. Yes, there are penalties for early withdrawal, but these accounts represent real wealth and future security.
Q: How does net worth compare to 'liquid net worth'?
A: Liquid net worth includes only assets you can convert to cash quickly (savings, investments, some securities). It excludes home equity, retirement accounts, and physical assets. Use liquid net worth for emergency planning.
Q: What net worth should I have at my age?
A: Benchmarks vary, but a common target is: net worth = (age × annual income) ÷ 10. A 35-year-old earning $70K should aim for ~$245K. The median is lower; focus on your personal growth trajectory.
Net worth is one measure of financial health, but not the only one. It doesn't account for income stability, insurance protection, or life circumstances. Use it as a tracking tool and benchmark, not the sole measure of financial success. This content is for educational purposes only.