What is Net-worth?

What is net-worth

Put basically, your net worth is your assets minus liabilities. You can think about your net worth as everything you own minus what you owe. If your assets exceed your liabilities then you have a positive net worth. If your liabilities are greater than your assets, you will have a negative net worth.

Your net worth is a snapshot of your financial situation at the point of time when calculating. If you calculate it today, it will show you the end result of your spending/investing. This can offer you a meaningful view of your finances and can help you see if you are on or off track with your goals and can give you a confirmation of “a job well done”.

There is no definitive answer to how often you should calculate your net worth. While some calculate it each month, others do it bi-annually or even annually. This can really come down to how much would this number help you with your goal, whether that be saving/investing, in terms of motivation. 

Schwab believes calculating your net worth once or twice a year is good

Though remember with personal finance, it is just that, personal, so do what helps you and is best for you and your situation.

In the investing world net worth is otherly known as book value or shareholder equity.


Your net worth will fluctuate day to day, but net worth should be looked at as an overall trend of your finances as what matters is as you age, your net worth ideally should grow.

By knowing where you stand financially, you will be more mindful of your spending, better prepared to make financially sound decisions and are more likely to achieve your short-term and long-term financial goals.

Asset vs liabilities 

When calculating our net worth what we have to do is break down all our assets and liabilities into their specific fields and find the values of each. There are many kinds of both assets and liabilities a person may have acquired throughout their lifetime.

Financial calculations

Calculating assets

When first calculating your assets it is easiest to value your most liquid assets these are normally cash and cash equivalents such as:

  • Current accounts & saving accounts
  • Physical cash

Next, we move on to investments where their value is determined by their market value which include:

  • Stocks
  • Bonds
  • Pensions
  • Mutual funds

Lastly, we have tangible assets which may not be as liquid as others such as:

  • Primary house
  • Rental Properties
  • House furnishings
  • Collectables – Precious metals, coins, art, antiques, etc
  • Jewellery
  • Vehicles: Cars, vans, boats & motorcycles

Once completed this list you need to add all the cash/cash equivalents, investments and real/personal property. The total will represent your total asset value.

Calculating liabilities


Liabilities are normally represented by all outstanding debt owed. This should be much easier to calculate as normally these are based on actual numbers, not estimates such as assets and can be proven what you owe with a monthly statement or reminder.

The debts most common are:

  • Car loans
  • Mortgages
  • Rental real estate mortgage
  • Credit card debt
  • Personal loans
  • Student loans

Adding up all these liabilities (debt) and the sum will represent your total amount of liabilities.

Increasing investments

Calculating total net worth

Once calculated both your total assets and total liabilities we can do the simple calculation of total assets – total liabilities = total net worth.

Having an organised record can be extremely helpful and speed up the calculation of your net worth. For example, if you have one in a file or on the computer, you will be able to find the necessary information quickly at your fingertips. Doing so will also help you visualise where your assets or liabilities are and align your goal and current habits.

Is it important?

“Budgets show where you’re at, your net worth shows where you’re going”. 

Tracking your net worth can be a great way to track that you are going in the right direction, it can also tell you whether you are investing and using your capital for the best returns possible. Knowing that every Pound, Dollar or Euro you are making and investing can be hugely motivating. Even on a debt-free journey, it can be hugely rewarding to see the debts being paid off, getting closer and closer to that end goal.

Net-worth not only helps you see your investments increase but it can also help you reduce accumulating debt and allows you to consider the effects before taking on debt.

Here are 7 reasons to start tracking your net worth

  1. A good indication of your overall financial health
  2. More important measurement than income
  3. Provides a measurement for your progress
  4. Emphasizes the importance of your investments
  5. Provides motivation to eliminate debt
  6. Results in better use of your money
  7. Shows the true impact of your financial decisions

If you are looking to track your net worth, download your own Net worth tracker for free on the Sensible Investors Forum.


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