What Is Net Worth?
What net worth is, how to calculate it, and why it is a better measure of wealth than income.
MINTING MONEY
Chayan Malkari
1/26/20252 min read
Introduction
You might hear people talk about someone's net worth, especially when discussing celebrities or billionaires. But net worth is not just for the rich. It is a simple number that anyone can calculate to understand their own financial health.
What Is Net Worth?
Net worth is the value of everything you own minus everything you owe. What you own are called assets, like cash, savings, investments, a car, or a home. What you owe are called liabilities, like student loans, credit card debt, or a car loan. The formula is simple: assets minus liabilities equals net worth.
An Example
Imagine you have $1,500 in savings, a car worth $6,000, and $500 in an investment account. Your assets total $8,000. If you still owe $3,000 on your car loan, your net worth is $5,000. If you owed more than you owned, your net worth would be negative, which is common for recent graduates with student loans.
Why It Matters
Income shows how much you earn, but net worth shows how much you have actually kept. Someone with a high salary who spends everything may have a lower net worth than someone with a modest income who saves and invests. Tracking your net worth once or twice a year is a great way to see your progress over time.
Conclusion
Net worth is your financial scoreboard. Start tracking it now, and you will be able to watch it grow as you save, invest, and pay off debt!