This is general information, not financial advice.
It's the one number that captures your whole financial life in a single figure — and most people have never actually calculated it.
The formula
Net worth is simple arithmetic: what you own minus what you owe.
Net worth = total assets − total liabilities
Positive, negative or zero, that number tells you whether you're building wealth or being held back by debt. Everything else in personal finance eventually flows through it.
Assets and liabilities
Assets (what you own, at current market value): cash and bank accounts; investments (brokerage, 401(k), IRA, pensions); your home and any real estate; vehicles; and other valuables you could realistically sell. Use honest, current values — not what you paid or hope to get.
Liabilities (what you owe, at current payoff balance): mortgage, student loans, auto loans, credit-card balances, medical debt, personal loans.
A worked example
| Assets | Value |
|---|---|
| Home (market value) | $400,000 |
| 401(k) and IRA | $150,000 |
| Cash and savings | $20,000 |
| Total | $570,000 |
| Liabilities | Balance |
|---|---|
| Mortgage | $250,000 |
| Student loans | $30,000 |
| Credit-card balance | $10,000 |
| Total | $290,000 |
Net worth = $570,000 − $290,000 = $280,000 — what the household actually owns, free and clear.
Net worth vs. income — not the same
Income is what you earn; net worth is what you've accumulated. A doctor earning $400,000 with huge student loans, a big mortgage and free-spending habits can have a near-zero or negative net worth, while a teacher who maxed a retirement account for decades and paid off a modest home can top $600,000. Income is a flow (it arrives and, if spent, disappears); net worth is a stock (the accumulated result of saving, investing and paying down debt). It's the better gauge of financial health because it reflects behavior over years, not one year's pay.
How the typical US household compares
The Federal Reserve's Survey of Consumer Finances, published every three years, is the authoritative source. Its 2022 edition found:
- Median US household net worth: about $192,900
- Mean (average): about $1,063,700
That ~$870,000 gap reflects how concentrated wealth is — a small number of very rich households pull the average far above what a typical family holds, which is why the median is the more useful benchmark (half of households have more, half less). Net worth also rises sharply with age: roughly $39,000 median for households under 35 versus about $364,500 for those aged 55–64. For most families, home equity is the largest single asset — meaning much of their net worth is illiquid.
Positive, negative, liquid, illiquid
Negative net worth (owing more than you own) is common early on — a grad with $50k in loans and $5k saved is at −$45k. That's a starting point, not a crisis; the trend matters. Separately, not all net worth is reachable: liquid assets (cash, taxable brokerage) convert to cash fast, while illiquid ones (home equity needs a sale or new loan; retirement accounts carry penalties before 59½) don't. Knowing your liquid net worth — stripping out home and retirement — tells you your real emergency flexibility.
How to track it — and common mistakes
Calculate it the same way once or twice a year: list assets at market value, list debts at payoff balance, subtract. A spreadsheet works; so do account-linking apps. Don't obsess over month-to-month market swings — the long-run trend is what counts (see our index-fund and compound-interest explainers). Common errors: overvaluing the home (use a realistic comparable) or the car (it depreciates fast), forgetting debts, and counting expected income as an asset.
Why it matters
Net worth is the scoreboard for your financial life. Paying down a high-interest card raises it; contributing to a 401(k) raises it; financing less raises it faster. Track it annually and it answers one blunt question honestly: am I getting ahead?
