Net worth. Maybe it’s one of those concepts you came across before when you googled the net worth of some athlete or celebrity.
But have you ever thought about your own net worth? While it certainly doesn’t capture everything about your financial life, the number can be a helpful snapshot.
Net worth is simply a dollar amount representing the total value of everything you own (your assets) after you’ve subtracted everything you owe (your liabilities). In practical terms, the number can help you assess your finances at a glance.
Keep in mind that net worth is only one metric for measuring financial health. There are other aspects you should consider (like your credit score for instance) when taking a broad view of your finances.
So now you may be curious… “What’s my net worth?”
Here’s how to figure it out. To determine your net worth, subtract your total liabilities from the total value of your assets.
Net Worth = Total Assets – Total Liabilities
Broadly speaking, your assets are anything you own that has value. Think about the things you can put a dollar amount to. The first one that probably jumps to mind is cash — like the balances in your checking, savings and retirement accounts. Assets can also include other items you could sell— like real estate, stocks, bonds or other valuables.
Liabilities, on the other hand, represent any financial obligations you are legally required to pay. This can include your current debts (your mortgage, credit card debt, student loans) along with any future debts.
Once you’ve calculated your net worth, you may be curious to see how you compare. Come on, everyone’s curious…
According to the Federal Reserve, here is the average net worth of US families in 2016, measured by the age of the head of household:
Remember that averages include very affluent outliers. So, let’s look at it from another angle.
From the same report, here is the median net worth (or midpoint value) of US families in 2016, measured by the age of the head of household:
While these comparisons may be interesting, they aren’t necessarily targets. What matters most are your own financial goals – both short-term and long-term – and understanding how you’re tracking against them.
Your day-to-day financial habits play a role in your ability to build net worth. Here are five habits to consider while keeping the big picture in mind.
So, what is net worth?
Ultimately, it’s a formula for measuring what you own against what you owe. Evaluating your assets against your liabilities gives you a high-level view of your overall financial health.
Tracking your net worth throughout your lifetime might serve as motivation to keep saving, investing and achieving your financial goals.
For others, it might be just another number. How you choose to think about net worth is entirely up to you.
This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.