Net worth is the simplest honest answer to “how am I doing financially”: it’s what you own minus what you owe. Add up your assets, subtract your liabilities, and the number that’s left is your net worth. Own $80,000 in assets against $50,000 in debts and your net worth is $30,000.
Your paycheck doesn’t tell you that. Neither does your checking balance the day after payday. Below: what goes on each side, how the subtraction works (plus the sign mix-up that catches people), and how to read the result.
How to calculate net worth
Grab a pen. It’s one line:
Net worth = total assets − total liabilities
Assets: what you own that’s worth something. Liabilities: what you owe. Total each column, then subtract. Here it is for a made-up household, a couple of years into paying off school and a car:
| Assets | Value | Liabilities | Balance owed |
|---|---|---|---|
| Checking and savings | $9,000 | Credit card | $2,500 |
| Investments and retirement | $46,000 | Car loan | $12,000 |
| Car (market value) | $15,000 | Student loans | $18,000 |
| Total assets | $70,000 | Total liabilities | $32,500 |
Subtract $32,500 from $70,000 and this household’s net worth is $37,500. Either column can move it. Knock down the car loan and net worth goes up, even though your pay didn’t change a cent.
What counts as an asset
Rule of thumb: if someone would hand you cash for it, it counts.
- Cash in hand, plus whatever’s parked in checking and savings
- Investment and retirement accounts, whether that’s a brokerage, a 401(k), an RRSP or a TFSA
- Your home or vehicle, priced at what it’d fetch today
- Other property worth the trouble. Think a serious coin or vinyl collection
Leave out the household stuff. Sure, your couch and your coffee maker are worth something. But they clutter the math without changing the answer, and you’d never sell them to cover rent. Use market value, not purchase price. That three-year-old car is worth what a buyer would hand you today, not what the sticker said.
What counts as a liability (and the sign that trips people up)
Now the other column. Liabilities are whatever you still owe on:
- Credit cards, at whatever the balance is right now
- Car loans and student loans
- A mortgage, or a home equity line
- Anything else still outstanding (a personal loan, money owed to the tax office)
This is the one spot the math goes sideways. A liability lowers your net worth, but you write it as a positive number and subtract the total. A $12,000 car loan is 12,000 in the liabilities column, not −12,000. Write debts as negatives and then subtract, and the two minus signs cancel. Now the debt is added to your net worth. Great-looking number, totally wrong. Keep debts as plain positive balances on the “owe” side and let the subtraction do the work.
How to read the number
One reading tells you where you are today. The trend tells you where you’re going. Care about the trend.
Negative early on? Totally normal. A grad with student loans, or someone a year into a mortgage, can owe more than they own and be doing everything right. You’re watching direction. If the number climbs month after month, assets are outgrowing debts, whether or not it’s crossed zero yet. Wikipedia’s entry on net worth as a concept describes it the same way: a snapshot of assets minus liabilities at one moment, most useful when you track it over time.
It also gives your other numbers context. Your savings rate is what grows it. Each dollar you keep either builds an asset or shrinks a debt, and both push net worth up. Your fixed-cost ratio decides how much income is free to do that job at all. And because net worth rolls your whole position into one figure, it’s a headline input to your overall financial health score.
How Skwad tracks your net worth
Skwad Sight adds up your assets and liabilities from your linked accounts and shows net worth as a trend, not a one-time tally. No spreadsheet to babysit, no re-typing balances every month. Accounts update, the number updates, and the line stays honest with zero bookkeeping on your end. A healthy net worth and a healthy emergency fund tend to grow together, and Sight keeps both in view.
See your whole financial position in one number
Get started with SkwadFrequently asked questions
How do I calculate my net worth?
Write down everything you own at today’s value: cash, checking and savings, investment and retirement accounts, what your home or car would sell for. Then everything you owe: card balances, student and car loans, a mortgage. Total both columns and take liabilities away from assets. What’s left is your net worth.
What counts as an asset for net worth?
Anything you own that someone would actually pay for: cash and bank balances, investment and retirement accounts, a home or vehicle at today’s market value, and other property worth the bother. Skip the stuff you’d never sell or can’t price cleanly, like your furniture and kitchen gear. It adds noise and doesn’t change the picture.
Do I subtract my debts, and how?
Yes. Liabilities are the balances you still owe, and they pull your net worth down. Write each one as a positive number (a $12,000 car loan is 12,000, not −12,000), then subtract the total from your assets. Enter a debt as a negative and subtract it anyway, and you’ve added it back by accident. That’s the most common net-worth math error.
Is it bad to have a negative net worth?
Nope, not by itself. Especially not early on. A new grad with student loans, or someone who just closed on a house, can owe more than they own for years and still be right on track. Watch the direction. A negative number that’s climbing toward zero, and past it, means the plan is working.
How often should I check my net worth?
Monthly or quarterly is plenty. It moves slowly, and checking daily just tempts you to react to normal market wobble. The useful part is the trend over a year or more, not any one reading. Watch it; don’t obsess over it.
Watch the number that captures everything
Think of your savings rate as a report card for one month. Net worth is the transcript. Every account, every debt, every dollar of progress, folded into a single line you can follow. Open Sight in Skwad to see yours, and watch it climb.
