Money guide · Budgeting, income, and net worth
How to calculate net worth and track progress
Calculate assets minus liabilities and distinguish net worth from income, liquid cash, and spendable wealth.
How it works
List reasonable current values for cash, investments, property, and other material assets. Then subtract outstanding loans and other liabilities. Use current debt balances, not monthly payments. Consistent estimates are more useful for tracking than overly optimistic values. Mark assets that would incur taxes or selling costs before becoming spendable cash.
A worked example
Cash of $8,000, investments of $22,000, and a home worth $300,000 total $330,000. A $240,000 mortgage and $10,000 other debt total $250,000. Net worth is $80,000. Only $8,000 is cash in this example; selling the home or investments involves a separate decision and possibly costs.
What to compare
Use the same date and valuation method for each update. Split liquid assets from illiquid assets, and distinguish retirement balances from ordinary cash. Track changes caused by new savings, debt reduction, and market moves separately where useful. Compare buying power over long periods rather than assuming every nominal dollar of growth represents an equal real gain.
A common mistake to avoid
Do not count a home’s equity as an asset and then subtract the mortgage again. Either include the full home value and full mortgage liability or use equity consistently in a simplified approach. Avoid interpreting a rising net worth as proof that next month’s bills are covered; cash timing still matters.
Is a retirement account part of net worth?
Generally yes, as an asset. Its balance may not equal accessible after-tax cash because distribution rules and taxes can affect what you can spend.
Sources and further reading
Connect this to inflation
Inflation changes the spending power of money over time. Read the related inflation explainer, or check inflation’s budget impact using your own assumptions.