How much money would you have left over if you sold everything you own and paid off all your debt?
Your answer is your “net worth.” It’s the value of your assets (including your home, savings, car, etc.) minus the amount you owe others (such as the bank, credit card companies, or family members).
In this guide, we’ll show you how to calculate your net worth and why it’s such an important number to keep an eye on.
What is net worth?
Your net worth is one of the most important things to consider when reviewing your financial health.
It’s like a scorecard for your money situation. It shows how much you have in assets after subtracting any debts, giving you a clear picture of your finances.
Ideally, your net worth should increase over time, indicating that you’re saving money, paying off debt, and building wealth.
Why it’s important to know your net worth
If your net worth is just the difference between what you have vs. what you owe, why should you care about it? Well, there are a few reasons:
It’s a snapshot of your financial health
Your net worth shows how much wealth you’ve built until now. Let’s look at an example:
You have $20,000 in your savings account. That sounds good, right? Well, if you also have $30,000 in credit card debt, you’re actually $10,000 in the hole.
By looking at your net worth, you get a fuller picture of your financial health. That way, you’re not misled by looking at just one piece of the puzzle.
It reflects your financial decisions
Calculating your net worth can also show whether you’ve made good decisions with your money.
Generally, you’ll likely have a higher net worth if you’ve made smart financial moves. However, if your net worth is low or negative, it could mean there’s room for improvement.
Having this knowledge about your past behaviors can help you identify ways you can change them.
You can improve your net worth
Once you know how to calculate your net worth and understand your past decisions with money, you can start taking steps to increase it.
For example, you might pay off your credit card debt, boost your retirement contributions, or create a monthly budget to improve your cash flow.
It can be addicting to watch a net worth tracker increase over time. It’s almost like playing a game!
How to calculate your net worth
Calculating your net worth involves three simple steps:
1. Total up your assets
An asset is something you own that has value and could be used to pay off debt. Here are just some examples:
- Your home
- Vehicles
- Equipment
- Cash
- Bank accounts
- Retirement funds
- Stocks
- Jewelry
- Artwork
- Technology
Your first step is to determine what each asset is worth and add them. Write down the total because you’re going to need it later!
2. Total up your liabilities
A liability is any amount you owe to a lender. This could be a bank, credit card company, or even a friend or family member. For this step, write down any balances you owe to someone else. For example:
- Your mortgage
- Credit card balances
- Personal loans
- Auto loans
- Student loans
- That $20 you owe your cousin
Add up each of these balances, and then write down that total.
3. Deduct your liabilities from your assets
You’re almost there! Take your total from step one (your assets) and subtract your total from step two (your liabilities):
Net worth = Assets – Liabilities
And voila! Now you’ve learned how to calculate your net worth.
Side note: You could always use an online tracker, like Lunch Money’s Net Worth Calculator, which does most of the work for you!
Net Worth Example
Tommy is a 28-year-old college graduate. He owns a home, a car, and some highly valued baseball cards. However, he also has some debt, including a mortgage and student loans:
| Assets | Liabilities |
| Home: $250,000 | Mortgage: $210,000 |
| Car (2019 Honda Accord): $15,000 | Car loan: $10,000 |
| Baseball cards: $7,000 | 401(k) loan: $10,000 |
| Savings: $10,000 | Student loans: $20,000 |
| 401(k): $30,000 | |
| TOTAL: $312,000 | TOTAL: $250,000 |
Altogether, Tommy has $312,000 in assets and $250,000 in liabilities. To find his net worth, just take his total assets and subtract all his debts:
$312,000 – $250,000 = $62,000
So, Tommy’s net worth would be $62,000.
What is a good net worth?
A good net worth can be hard to define. If you’re fresh out of college, having a low net worth is to be expected because you haven’t had much time to build wealth. It doesn’t mean that you’re in poor financial shape.
Once you’re more established in your career, you’ll want to focus on growing your net worth to prepare for retirement. One way to evaluate your net worth is by measuring it against others in your age range.
For example, here was the median net worth in the U.S. by age as of 2022, according to the Survey of Consumer Finances (SCF) report from the Federal Reserve:
| Age Range | Net Worth |
| Less than 35 | $39,000 |
| 35-44 | $135,600 |
| 45-54 | $247,200 |
| 55-64 | $364,500 |
| 65-74 | $409,900 |
| 75 or more | $335,600 |
Don’t be discouraged if you’re below average for your age range, as there are steps you can take to boost your net worth!
How to increase your net worth
Don’t be discouraged if you’re below average for your age range, as there are steps you can take to boost your net worth! Here are some tips for how to improve it:
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Reduce your debt: Concentrate on paying off high-interest credit cards or student loans. Consider making extra mortgage payments or downgrading your car to lower your auto loan balance.
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Automate your savings: Pay yourself first each month by saving a portion of your paycheck as soon as you get it. Setting up recurring transfers to savings can make this process easier.
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Contribute more to retirement: Try to max out your retirement accounts. These accounts often have tax advantages, making it easier to build wealth, especially if your employer matches your contributions.
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Avoid taking on new debt: Don’t use a credit card unless you can pay it off on time and in full. Only take out loans that support your long-term goals, for example, home renovations that increase your property value or education to increase your income.
Using Lunch Money’s net worth tracker
Lunch Money syncs your banking and investment accounts, allowing you to view your savings, investments, and debts in one place. It even translates different currencies, including crypto, into the currency of your choice.
Lunch Money uses this information to subtract your liabilities from your assets automatically, providing a monthly snapshot of your net worth.
All you have to do is log into Lunch Money and view your net worth chart to track how it’s changed over time. Plus, it breaks down your assets and liabilities to see what factors contribute to your total wealth.
Bottom line
Knowing how to calculate your net worth can help you understand your financial situation and find areas where you can make changes.
To figure out your net worth, total up your assets and subtract your liabilities. If you want to simplify it, sign up for a 30-day free trial with Lunch Money to try out our net worth tracker. If you want to see it in action, Lunch Money team member Jacob Wade walks through our net worth tracker near the end of this YouTube video.
