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What Is Net Worth?

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Net worth equals assets minus liabilities and serves as a general marker of financial health — one that can help you evaluate your savings and investments against your debts.

Ever Googled a celebrity’s net worth for fun? And then while dreaming of being able to afford a private jet to a private island, you might start wondering, what exactly is net worth anyway? 

If so, you’ve come to the right place. Net worth might seem like a concept only tailored to the uber-rich, but the truth is, we all have a net worth. While it certainly doesn’t capture everything about your financial life, the number can be a helpful snapshot of your finances. 

Net worth definition 

Net worth is a dollar amount representing the total value of everything you own (your assets) after you’ve subtracted everything you owe (your liabilities). Knowing this number can help you assess your finances at a glance. 

Net worth can be either positive or negative. As you might’ve guessed, positive net worth refers to the value of everything you own being greater than what you owe. Negative net worth, on the other hand, is when what you owe (like your debts) is greater than the value of what you own.

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. 

How to calculate net worth

Now that we’ve established that net worth is for everyone, not just the celebrity crowd, you may be wondering… “What’s my net worth?” 

Net Worth = Total Assets – Total Liabilities

There are plenty of net worth calculators out there you can use, but it’s also pretty simple to calculate net worth on your own. Here’s how to figure it out. 

To determine your net worth, subtract your total liabilities (aka, anything you owe) from the total value of your assets (aka anything you own).

So the net worth formula looks like this:

Net Worth = Total Assets – Total Liabilities

Assets

Broadly speaking, your assets are anything you own that has value. So 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. You can also include money you have invested in any brokerage accounts – don’t worry about liquidity of those right now, you’re just getting a snapshot of the total value of your assets. 

Assets can also include other items you could sell like your home or other real estate holdings, any vehicles you own, and other items of value like art, valuable jewelry, coin collections, etc. 

Liabilities

Liabilities , on the other hand, represent any financial obligations you are legally required to pay. In layman’s terms, any money you owe is considered a liability. This can include your current debts (your mortgage, credit card debt, student loans) along with any future debts.

In case that all sounded like a bunch of financial mumbo jumbo, let’s take a look at an example. For assets, let’s say an individual has a house worth $400,000, $15,000 in a savings account and $32,000 in an IRA. 

The same individual has $250,000 left on their mortgage, a credit card balance of $2,500 and $10,000 left in student loan debts. 

Using the net worth formula, we add up all of the liabilities and subtract that from the total assets.

($400,000 + $15,000 + $32,000) – ($250,000 + $2,500 + $10,000) = $447,000 - $262,500 = $184,500.

So in this example, the individual’s net worth is $184,500. 

Did you know? Marcus Insights tools and trackers now include a net worth feature that is updated on a regular basis so you can see your net worth at a glance.

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Reaching your goal starts with saving for it.

Compare your average net worth by age

Once you’ve calculated your net worth, you may be wondering how you compare to other people.

According to several sources, the average net worth of US families in 2019, measured by the age of the head of household :

  • Age 35 or younger: $76,300
  • Age 35-44: $436,200
  • Age 45-54: $833,3,500
  • Age 55-64: $1.17 million
  • Age 65-74: $1.22 million
  • Age 75 or older: $977,600

If those numbers surprise you, remember that averages include very affluent outliers! So, let’s look at it from another angle.

Here is the median net worth (or midpoint value) of US families in 2019, measured by the age of the head of household:

  • Age 35 or younger: $13,900
  • Age 35-44: $91,300
  • Age 45-54: $168,600
  • Age 55-64: $212,500
  • Age 65-74: $266,400
  • Age 75 or older: $254,800

While these comparisons may be interesting, they aren’t necessarily targets. Everyone’s net worth may be a little different (and can certainly change over time) depending on goals and priorities.

Let’s take debt as an example. Student loans are a type of debt that could lead you to have “negative” net worth. But that doesn’t mean it will stay that way. This type of debt may also have value down the road – a “good ” debt we could say!

Everyone’s approach to finances and net worth may look a little different.

You can think of good debt as an investment that’s expected to pay off in the future. While it can certainly be discouraging to see your net worth in the red if you have student loans, your education is an asset that hopefully ends up paying off in the long run. For example, taking on student loans may help you get a higher-paying job, something that has the potential to boost your net worth. 

So remember: Everyone’s approach to finances and net worth may look a little different. What matters most are your own financial goals – both short-term and long-term – and understanding how you’re tracking against them

Help optimize your financial habits to increase net worth

Your day-to-day financial habits can play a crucial role in your ability to build net worth. While that might not surprise you, it’s worth reiterating if you’re getting serious about growing your own net worth. Here are three habits to consider while keeping the big picture in mind. 

  • Increase your contributions to your savings and take advantage of compound interest. The longer your savings can accumulate interest, the more your savings could grow
  • Consider using online apps and/or budgeting tools that help you stay organized with your finances and let you view all of your accounts as easily as possible. That way, you’ll have a fuller picture of your finances without having to track down all of your various accounts. You can then analyze your monthly expenses to determine your cost of living and make proactive changes to help you save money and increase investments. 
  • Maximize your retirement savings , especially if your employer offers a 401(k) match. You may also consider opening an Individual Retirement Account (IRA) if you hit the annual limit on your 401(k). That’s right, you can have an IRA, a 401(k) and even a Roth IRA to boot! (So long as you’re within income requirements).
  • Be sure to pay off your credit card bill in full and on time each month. That way you can avoid costly interest charges (which could take away from your personal net worth!).

Did You Know? If you’re interested in apps/budget tools like we discussed earlier, you might want to check out Marcus Insights – it’s completely free (even if you’re not a Marcus customer!). Marcus Insights lets you see all of your linked accounts at a glance and gives you tools to make empowered financial decisions.

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.

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