Oftentimes, when we hear the word “net worth”, we think about successful celebrities or CEOs of powerful companies. Although these groups often have a financial leg up or privileged access to financial information, that doesn’t mean they solely get to dominate the conversation around net worth.
Credit Karma reports that 51% of Americans don’t know how to calculate net worth, 31% have a net worth of $0 or less, and 67% are not tracking their net worth.
In reality, every household has a net worth. Yes, that includes you!
Let’s distill the basics so you, too, can prioritize your net worth.
In essence, net worth is quite simple. Net worth equals what you own minus what you owe. If you have more assets than debt, your net worth is positive. If your debts are higher, your net worth is negative.
Why is it important to keep track of this number? Because tracking your net worth over time helps you see progress and spot problems early.
Those who make a high income may not actually have a great net worth. How, you ask? Let’s look at an example that shows how high income does not guarantee a high net worth.
Net Worth Examples
Meet Jordan. He makes around $120,000 a year. At first glance, you may believe he is financially doing well. However, Jordan has a high spending habit. He drives a new car, rents an expensive apartment at the center of the city, carries credit card balances, and is paying off student loans. He has a small emergency fund and no investment plan.
When Jordan looks at his asset list, it’s quite short compared to his debt list.
Despite reaching a high income, his net worth is negative. Without a steady check, his emergency cushion would quickly be in trouble.
Now meet Taylor. She makes around $55,000 a year. Taylor may make less than Jordan, however, she sticks to her budget, financial goals, and invests wisely. She drives a used car that she has paid off, shares a modest apartment, and keeps monthly expenses low. She has built a solid emergency fund, contributes to a retirement account every month, and avoids carrying a credit card balance.
When Taylor looks at her asset list, it’s healthy compared to her debt list.
Even with a smaller income than Jordan’s, her net worth is positive and growing.
The difference in outcomes is not based on a paycheck, but rather the right mix of debt and assets with everyday financial choices.
Calculate Net Worth
You can figure out your number in a few steps.
- Write down what you own. Include checking and savings, retirement accounts, investment accounts, and the value of any property or cars you own outright.
- Write down what you owe. Include credit card balances, student loans, personal loans, car loans, and any other debts.
- Now subtract. Take your total assets minus your total debts. What’s left is your net worth.
- Track and act on your number. The number you just calculated can be positive or negative. What matters is that you get this number moving north over time. If you are sitting in the negative, it’s time to do a major financial check-in, make smart money moves, and make necessary changes.
Our digital tools can help make this easier! With our WiseOne Money Management app you can see your accounts in one place, track spending, and find areas to free up cash to build wealth, while our AI-backed financial wellness co-pilot can highlight patterns in your money habits and suggest small changes that grow your net worth over time.
Your net worth belongs to you. It is not a concept reserved for the wealthy. Start by knowing your number, then use it as a guide as you save, pay down debt, and build the future you deserve!
