Ledger
How to Calculate Your Net Worth, and What to Do With the Number
By Nasim Farhan, Founder, Expentify · October 19, 2026 · 5 min read
Net worth is the single number that shows whether your finances are moving forward. Here's how to calculate it correctly, which items people usually get wrong, and how to read the change from one quarter to the next.
Key takeaways
- Net worth = everything you own (assets) − everything you owe (liabilities).
- Value assets at what you could sell them for today, not what you paid.
- Paying off debt from savings doesn't change net worth; it swaps one balance for another.
- The trend from quarter to quarter matters far more than any single figure.
Monthly budgets show where money went. Net worth shows where you've got to. It's a single figure, what you own minus what you owe, and tracking it every few months is one of the clearest ways to see whether your saving, spending and debt payments are adding up to progress. The calculation is simple, but a few common mistakes can make the number misleading, so it's worth doing carefully.
The formula
Net worth = total assets − total liabilities
Assets are things you own that have a money value: cash, bank balances, investments, retirement accounts, and property or vehicles you could sell. Liabilities are what you owe: credit card balances, car loans, student loans, a mortgage, money owed to family, and any unpaid bills.
A worked example
Here's a snapshot for someone a few years into their career. Assets:
Checking account: $2,400
Savings account: $6,500
Retirement account: $18,200
Car (current resale value): $9,000
Total assets: $2,400 + $6,500 + $18,200 + $9,000 = $36,100.
Liabilities:
Credit card balance: $1,850
Car loan (remaining principal): $7,400
Student loan (remaining principal): $21,300
Total liabilities: $1,850 + $7,400 + $21,300 = $30,550.
Net worth: $36,100 − $30,550 = $5,550.
The details people get wrong
Using purchase price instead of current value. A car bought for $24,000 three years ago might sell for $9,000 today. Use the realistic sale value from a pricing guide or comparable listings. The same applies to a home: use a conservative estimate of what it would sell for, and consider subtracting likely selling costs.
Counting personal belongings. Furniture, clothes and electronics usually sell for a small fraction of what they cost. Most people leave them out, or include only items with a real resale market, such as jewelry or collectibles, at a conservative value.
Forgetting smaller debts. Store cards, buy-now-pay-later plans, medical bills on payment plans and money borrowed from family all count.
Using the wrong loan figure. For loans, use the remaining principal (the payoff amount), not the total of all future payments including interest.
Ignoring tax on retirement accounts. Money in a traditional pre-tax retirement account will usually be taxed when withdrawn, so it's worth less to you than its balance suggests. Many people simply note this rather than adjusting for it, but it's useful to be aware of when comparing accounts.
Mixing dates. Take all balances on the same day, such as the last day of the month, so the snapshot is consistent.
Why paying off debt from savings doesn't change your net worth
This surprises a lot of people. Suppose you use $1,000 from savings to pay down the credit card. Your assets fall by $1,000 and your liabilities fall by $1,000, so net worth doesn't move at all. That doesn't mean the payment was pointless: you've stopped paying interest on that $1,000, which will raise your net worth over time. But the immediate effect is a swap, not a gain.
It's the same principle that double-entry bookkeeping is built on: every transaction has two sides. Net worth goes up only when money comes in from outside (income, investment growth) and is kept rather than spent, or when the value of something you own rises. It goes down with spending, interest charges and depreciation.
Reading the change from one quarter to the next
One snapshot tells you little. The useful information is in the change. Suppose that three months after the example above:
Savings rose by $1,200 from money left over each month.
The retirement account rose by $900 from contributions and market growth.
The car's resale value fell by $500.
Payments from income cut the credit card by $600, the car loan by $450 and the student loan by $300.
New total assets: $36,100 + $1,200 + $900 − $500 = $37,700. New total liabilities: $30,550 − $600 − $450 − $300 = $29,200. New net worth: $37,700 − $29,200 = $8,500, an increase of $2,950 in the quarter.
Breaking the change down is more useful than the headline figure. Here, $1,200 + $900 + $600 + $450 + $300 = $3,450 came from saving and debt repayment, and $500 was lost to car depreciation. That tells you the progress came mostly from habits you control, rather than from a lucky market quarter, which is the kind of progress you can count on continuing.
What if your net worth is negative?
A negative net worth is common, especially early in a career or soon after taking on student loans or a mortgage with a small down payment. It isn't a verdict on your finances; it's a starting point. What matters is the direction. A figure that goes from −$12,000 to −$9,000 over a year is real progress.
How often to calculate it
Monthly is fine if you enjoy tracking, but quarterly is usually enough and smooths out noise from market swings and bill timing. The Federal Reserve's Survey of Consumer Finances measures household net worth in this same way, as assets minus debts, so if you're curious how typical households compare, that survey's published summaries are a reliable place to look. Bear in mind that its figures cover all ages and income levels, so your own trend is a more useful comparison than any national figure.
Keeping it easy
The easiest way to make net worth tracking stick is to record each account and each debt as its own balance, so the figure can be totalled in a minute rather than rebuilt from statements every time. A spreadsheet with one row per account and one column per quarter works well; so does any ledger that keeps assets and liabilities as separate accounts.
Sources
Board of Governors of the Federal Reserve System, Survey of Consumer Finances, federalreserve.gov.
U.S. Securities and Exchange Commission, Investor.gov, saving and investing basics, investor.gov.
Consumer Financial Protection Bureau (CFPB), consumer tools on debt and saving, consumerfinance.gov.
This guide is general information to help you think through your own numbers. It isn't financial advice, and your situation may call for a different approach. For decisions with real consequences, talk to a licensed financial professional.
Frequently asked questions
Should I include my home in my net worth?
Yes, if you own it. Include a conservative estimate of its current sale value as an asset and the remaining mortgage principal as a liability.
Is net worth the same as income?
No. Income is what you earn over a period; net worth is what you'd have left if you sold everything you own and paid off everything you owe on a given day.
Why did my net worth fall when I bought a car with cash?
Cash went down by the purchase price, but the car is counted at its resale value, which is usually lower than what you paid, especially for a new car. The difference shows up as a drop in net worth.