The one number that summarises your finances
Net worth is everything you own minus everything you owe. It is the single most useful financial metric because it captures both sides at once — unlike income, which says nothing about debt, or savings, which says nothing about liabilities.
In the default scenario, $552,000 of assets against $335,000 of debts gives a net worth of $217,000. That is the number to track, and its direction over time matters far more than its level at any moment.
Track it quarterly, not daily. Market movements make short-term changes noisy and meaningless. What you want to see is a trend line rising over years, driven by saving and debt paydown rather than by asset prices.
Not all net worth is equally useful
Two people with identical net worth can be in very different situations depending on what it consists of. This is why the calculator breaks it down further.
Home equity is real wealth but not spendable wealth. In the defaults, $85,000 of equity represents about 39% of total net worth — money that cannot pay a bill without selling the house or borrowing against it. Someone whose net worth is almost entirely home equity is wealthy on paper and potentially cash-poor in practice.
Investable assets — cash, investments, and retirement accounts — are the portion that compounds and eventually generates income. At $145,000 here, this is the number most relevant to retirement planning.
Liquid net worth, cash and investments minus short-term debt, is what you could actually reach in a crisis. At $56,000 it is a fraction of the headline figure, and it is the number that determines whether a job loss is an inconvenience or a catastrophe.
Valuing things honestly
The most common error is optimistic asset valuation, and it defeats the purpose of the exercise.
Value your car at what it would actually sell for today, which private-party pricing guides will tell you — not what you paid, and not what you feel it is worth. Vehicles depreciate relentlessly and most people overestimate them substantially.
Value your home conservatively, and remember that selling costs roughly 6–8% in agent fees and closing costs. Equity is not what you would sell for; it is what you would sell for minus those costs minus the mortgage.
Household goods, clothing, and electronics are generally worth including only if genuinely valuable. Most possessions have resale values so far below their purchase price that including them mostly inflates the number without informing anything.
For retirement accounts, use the current balance. Do not adjust for the tax you will eventually owe on traditional accounts, but do remember it exists — a $85,000 traditional 401(k) is not the same as $85,000 in a Roth.
Reading the debt-to-asset ratio
Total debts divided by total assets gives a leverage measure. At 60.7% in the defaults, a majority of what this household owns is financed. Below 50% is generally considered healthy, and the ratio should fall steadily with age.
Context matters more than the number, though. A mortgage on an appreciating home at a fixed low rate is structurally different from credit card debt at 23%, even though both appear identically in the ratio. When assessing your own, separate productive debt — a mortgage, possibly student loans — from consumer debt, which is nearly always worth eliminating first.
A negative net worth is common and usually temporary. Recent graduates with student loans and few assets routinely start below zero. The trajectory is what matters: a net worth improving by $15,000 a year from −$30,000 is a healthier position than a static $50,000.
Frequently asked questions
- Should I include my 401(k)?
- Yes. Retirement accounts are assets you own. Remember that traditional accounts carry future income tax on withdrawal, so a Roth dollar is worth somewhat more than a traditional one.
- Should I include my house?
- Include the home's value as an asset and the mortgage as a debt — the difference is your equity. The calculator shows what share of your net worth this represents, which is worth watching.
- What is a good net worth for my age?
- A frequently cited rule of thumb is age × income ÷ 10, so a 40-year-old earning $80,000 might target around $320,000. Treat these benchmarks loosely — they ignore location, career stage, and cost of living entirely.
- How often should I calculate it?
- Quarterly is plenty. Monthly invites reacting to market noise; annually is too infrequent to catch a problem early.