TL;DR: Net worth equals total assets minus total liabilities. List what you own at realistic resale values, list what you owe at current balances, and subtract. In the worked example below, assets of $612,400 minus liabilities of $287,900 give a net worth of $324,500. The arithmetic is trivial. The honesty is the hard part, because every inflated asset value flows straight into the headline number.
Key Takeaways
- Assets are valued at what they would sell for, not what they cost or what you hope they fetch.
- Liabilities are current payoff balances, including the small ones people forget: cards, tax owed, and loans from family.
- Net worth is a snapshot, not a score. Its trend across quarters matters more than any single reading.
- Liquid net worth, the part you could reach in a week, is a separate and stricter number worth tracking alongside.
Step one: list the assets at honest values
Cash and account balances are exact. Investments are worth today's market value, which any brokerage statement gives you. Property is the judgement call: use a conservative estimate of what it would actually sell for, minus selling costs if you want the strict version. Vehicles, equipment, and valuables go in at resale value, which is usually far below purchase price. Sentimental value is not an asset class.
The example household: home estimated at $450,000, investment accounts $118,000, bank accounts $22,400, vehicle resale value $18,000, and other valuables $4,000. Total assets: $450,000 plus $118,000 plus $22,400 plus $18,000 plus $4,000 equals $612,400.
Step two: list every liability at its payoff balance
Debts are exact figures, which makes the omissions the only error source. The example: mortgage balance $265,000, auto loan $14,200, credit cards $6,300, and a student loan $2,400. Total liabilities: $265,000 plus $14,200 plus $6,300 plus $2,400 equals $287,900.
Common omissions: taxes owed for the year, buy now pay later balances, money owed to family, and the remaining obligation on leases you are treating as monthly expenses. If you would have to pay it to be free and clear, it is a liability.
Step three: subtract, then read the result properly
$612,400 minus $287,900 equals $324,500. That is the net worth. Now read it with care. A household can have a strong net worth and a cash problem at the same time, because most of this example's wealth sits in a house and retirement accounts that cannot pay next month's bills. That is why the liquid figure matters: here, bank accounts of $22,400 minus card balances of $6,300 give roughly $16,100 of immediately reachable net resources.
Redo the calculation on a fixed cadence, quarterly is plenty, using the same valuation rules each time. The rules matter more than the result, because a series built on consistent rules shows a true trend, while a series built on optimistic months shows a story. Tracking the investment side across accounts is its own discipline; see how to track investments across multiple brokerages.
