Net worth is the total value of everything you own (assets) minus everything you owe (liabilities). It provides a snapshot of your overall financial health. A positive net worth means your assets exceed your debts, while a negative net worth means you owe more than you own.
- A simple formula: add up everything you own, subtract everything you owe — the result is your net worth
- Negative net worth is common for recent graduates with student loans — it typically turns positive by age 30–35
- Home equity is usually the largest single asset, often representing 40–60% of total net worth
- Track liquid net worth separately (cash + investments minus debts) for a clearer picture of accessible wealth
- Net worth is a better financial health indicator than income — high earners can still have low or negative net worth