Net worth is the most honest snapshot of your financial health. Unlike income, which only measures how much flows in, net worth measures what you actually own minus what you owe. It is the number that determines whether you are making real financial progress or just running in place on a treadmill of income and spending.
The Formula
Net Worth = Total Assets − Total Liabilities Assets include everything you own with monetary value. Liabilities include every debt you owe.
What Counts as an Asset
- Cash and savings accounts
- Investment accounts (brokerage, 401(k), IRA, HSA)
- Real estate (current market value)
- Vehicles (current resale value, not purchase price)
- Business equity
- Other valuables (jewelry, collectibles — at realistic resale, not sentimental value)
What Counts as a Liability
- Mortgage balance remaining
- Student loan balance
- Auto loan balance
- Credit card balances
- Personal loans
- Medical debt
Net Worth by Age: Benchmarks
| Age | Median Net Worth (US) | Top 20% Threshold |
|---|---|---|
| Under 35 | $39,000 | $150,000+ |
| 35–44 | $135,000 | $500,000+ |
| 45–54 | $247,000 | $900,000+ |
| 55–64 | $364,000 | $1,400,000+ |
| 65–74 | $410,000 | $1,700,000+ |
Source: Federal Reserve Survey of Consumer Finances. These are household figures, so couples are counted together. If your net worth is above the median for your age group, you are doing better than half of American households. The goal is consistent upward movement, not hitting a specific number at a specific age.
Why Net Worth Matters More Than Income
A surgeon earning $400,000 per year with $500,000 in student debt, a $1.2M mortgage, and minimal savings has a lower net worth than a teacher earning $55,000 who owns a paid-off home and has $200,000 in retirement accounts. Income is not wealth. The only way to build wealth is to consistently spend less than you earn and invest the difference, which is exactly what net worth tracks over time.
How to Track It
Calculate your net worth once per quarter. Use a simple spreadsheet or the Budget Planner to monitor your spending and savings rate. The most important trend is the direction: is your net worth going up each quarter? If not, either your debts are growing or your savings rate is too low. Over a 30-year career, tracking this single number quarterly will do more for your financial health than any other habit.
Key Takeaways
- Net worth = Assets minus Liabilities. It is the most complete measure of your financial position.
- A negative net worth is normal in your 20s if you have student loans. The goal is to cross zero as quickly as possible.
- Track it quarterly to ensure you are making consistent progress.
- Home equity counts but is illiquid — also track your net worth excluding your primary residence for a clearer picture of investable wealth.
- Focus on savings rate. A high savings rate is the strongest predictor of growing net worth over time.
Frequently Asked Questions
What is a good net worth at 30?
The median net worth for Americans under 35 is about $39,000. A common rule of thumb is to have a net worth equal to half your annual salary by age 30. So if you earn $60,000, a net worth of $30,000 or more puts you on track. Having a negative net worth at 30 is common for those with student loans.
Should I include my car in my net worth?
Yes, include your car at its current resale value (check Kelley Blue Book), not what you paid for it. If you have an auto loan, the car's value goes in assets and the loan balance goes in liabilities. Most cars depreciate rapidly, so their net contribution to your net worth is often small or negative.
Does net worth include retirement accounts?
Yes. Include the current balance of all retirement accounts (401(k), IRA, Roth IRA, pension). Keep in mind that pre-tax accounts like traditional 401(k)s will be taxed upon withdrawal, so their after-tax value is lower than the stated balance. Some people calculate both gross and after-tax net worth for a more accurate picture.