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Financial Literacy: Net Worth

This guide discusses topics related to financial literacy

What is Net Worth?

Set of scales

This guide has discussed both assets (like income and savings investments) and liabilities (like debt and loans). These play a major role in determining your net worth. Net worth is a way of stating how much wealth you have, and it does so by comparing your assets (your investments, money in bank accounts, home, car) to your liabilities (your student loan, car loan, mortgage, credit card debt). You just have to subtract what you owe from what you own.

When you consider what you own, only account for things that have significant value (like a car or house) and do not depreciate (lose their value) too quickly. Things like your TV and furniture aren’t often included in your net worth because they lose their value relatively quickly. If you collect art or own expensive jewelry, those things should be included in your net worth because they generally increase in value over time.

Individuals who consistently increase their net worth are considered to be in good financial health. As you start to save and invest money and pay off your debts, your net worth will increase. It’s a good idea to calculate your net worth every so often to see how you’re doing. If your net worth is not increasing, you may not be putting yourself in a good position for retirement.