How to Calculate Your Net Worth

The formula

Net worth = Total assets − Total liabilities

Assets      = everything you own that has value
Liabilities = everything you currently owe

That is the entire calculation. Every difficulty in practice comes from deciding what belongs in each column and what number to write next to it — not from the arithmetic.

One clarification before the columns: net worth is a snapshot, measured on a single date. It is not income, and it is not a measure of how much you can spend. A person with a large net worth held entirely in property may have very little available to them this month.

What goes in the assets column

• Cash — current accounts, savings accounts, cash ISAs or equivalents, physical cash.
• Investments — brokerage accounts, index funds, ETFs, individual shares, bonds, at current market value.
• Pensions and retirement accounts — at their current stated value, including workplace pensions, even where you cannot access them for decades.
• Property — your home and any other real estate, at an honest estimate of what it would sell for today, not what you paid or what you hope to get.
• Vehicles — at trade-in or private sale value, if you include them at all (see below).
• Business equity — your share of a business you own, if it could realistically be sold or valued.
• Money owed to you — loans you have made to other people, if you genuinely expect repayment.

What goes in the liabilities column

• Mortgage — the outstanding principal balance today.
• Loans — car finance, personal loans, student loans, at their current balance.
• Credit cards — the full statement balance, not the minimum payment.
• Buy-now-pay-later and overdrafts — small individually, easy to forget, and they belong here.
• Tax owed but not yet paid — self-employment tax set aside, or a known bill due.

The awkward cases

A mortgaged home. The property goes in as an asset at market value, and the mortgage goes in as a liability at its outstanding balance. The two net out to your equity automatically. The frequent error is entering the equity as the asset *and* the mortgage as a liability, which subtracts the debt twice.

Your car. Practice genuinely differs here. Some people include it at trade-in value on the grounds that it could be sold; others exclude it entirely on the grounds that it is a depreciating item they will always need to replace. Both produce a coherent number. Including it makes your net worth higher and its growth slower, since the car falls in value every year.

A pension you cannot touch for thirty years. It is yours, so it belongs in the total. What it is not is *available*, which is a separate property worth tracking separately rather than solving by leaving it out.

Joint finances. Either track the whole household — all assets, all debts, both incomes — or track your individual share of everything. Mixing the two, such as counting a jointly owned house in full against only your own savings, produces a figure that means nothing. The choice matters less than making it once and keeping it.

Multiple currencies. Pick one base currency and convert everything into it. Be aware of the consequence: your net worth will then move when exchange rates move, even in a month where you neither earned, spent, nor invested anything.

Is your home really an asset? There is a long-running argument that a house you live in is not an asset because it produces no income and costs money to hold. The accounting answer is that it is an asset — it has realisable value. The argument underneath is really about liquidity and cash flow, and it is better handled by tracking liquid net worth alongside the total than by leaving a large number out of the calculation.

Liquid net worth is a different number

Total net worth answers "what am I worth". Liquid net worth answers "what could I actually use". They can differ by an order of magnitude for someone whose wealth is mostly a house and a locked pension.

Liquid net worth = Accessible assets − Short-term liabilities

Accessible = cash, investments you could sell, accounts you can draw on
Excluded   = primary residence, vehicles, locked pensions

Early-retirement calculations generally run on the liquid figure rather than the total, because a portfolio that cannot be drawn on cannot fund living costs. This is why the same person can be simultaneously well above a net worth milestone and nowhere near being able to stop working.

Why the trend beats the number

A single net worth figure is close to meaningless in isolation. It depends on your age, your country, your currency, your career stage, and how you chose to value a car. What carries information is the direction and the slope.

• A rising trend through a flat market means your savings rate is doing the work.
• A rising trend in a rising market tells you less — some of it is not yours in any durable sense.
• A falling figure during a market decline is expected and says nothing about your decisions; the same fall while markets rise is worth investigating.
• The month-to-month change is noisy. The twelve-month change is the signal.

Measuring monthly or quarterly, on roughly the same date each time, is the common cadence. More often than that mostly captures market noise; much less often and you lose the ability to see a trend forming.