In more detail
Assets include cash, investments, retirement accounts, the home and vehicles; liabilities include the mortgage, car and student loans and card balances. Count assets at what you could realistically sell them for, not what you paid, and include every debt. Net worth is a snapshot of a single date, while income is a flow over time: a high income with high spending can come with a low or negative net worth. Tracking it once or twice a year shows whether you are building wealth.
Why it matters
Net worth is the single number that shows the combined effect of saving, investing, borrowing and spending. It is common to be negative early in life, for example with student loans; the trend matters more than the level.
Example
| Assets | Liabilities | ||
|---|---|---|---|
| Home | $350,000 | Mortgage | $220,000 |
| Retirement accounts | $85,000 | Student loan | $15,000 |
| Car | $18,000 | Car loan | $9,000 |
| Savings | $12,000 | Credit card | $2,500 |
| Total | $465,000 | Total | $246,500 |
Net worth: $465,000 − $246,500 = $218,500.
Common confusion
Equity is ownership in a single asset, such as a home; net worth adds up all assets and all debts.