Net worth

Net worth is the total value of everything a person, household, or business owns, minus everything they owe. It is the single most comprehensive snapshot of financial position at a point in time.

Formula

Net Worth = Total Assets − Total Liabilities

Common assets

• Cash and savings accounts
• Investment portfolios (shares, ETFs, managed funds)
• Retirement and pension balances
• Property values (residence and investment)
• Vehicles, business interests, and other valuable possessions

Common liabilities

• Mortgages on primary residence and investment properties
• Personal and car loans
• Credit card balances
• Outstanding tax obligations
• Student loans and other deferred debts

Example

A household owns a $750,000 home, $180,000 in retirement accounts, $40,000 in shares, and $25,000 in cash. Total assets: $995,000. They owe $480,000 on the mortgage and $15,000 on a car loan. Total liabilities: $495,000. Net worth = $500,000.

Why net worth matters

• Single number for tracking progress — easier to monitor over time than tracking individual accounts
• Reveals hidden trends — debts can grow even while income rises, eroding net worth
• Drives major life decisions — retirement readiness, insurance levels, and risk capacity are all anchored to net worth
• Equity in major assets contributes most — for many households, equity in the family home and retirement balances form the bulk of net worth

Reviewing net worth annually — and projecting it forward — helps reveal whether current saving and investing habits are on track to meet long-term goals.