Defining – and Calculating – Your Net Worth

By Mitchell J. Smilowitz, CPA

Net worth is an important financial concept. It gives you an overall view of your current financial position and offers important insight into your progress towards long-term financial goals, such as retirement.

Simply put, net worth is the value of your assets minus your liabilities. Net worth provides a snapshot of your current financial position. In general, your net worth measures your “wealth.”

When assets exceed liabilities, an individual has positive net worth. When liabilities exceed assets, an individual has negative net worth.

What Are Assets?

An asset is anything you own that has monetary value. Assets can be thought of as something that, in the future, can generate cash flow or reduce expenses.

There are three types of assets.

  • Current assets include cash and cash equivalents, such as CDs, checking and savings accounts as well as any money that you are owed.
  • Fixed assets include long-term resources such as your home, car(s), jewelry, etc.
  • Financial assets include your investments, both retirement and non-retirement investments.

What Are Liabilities?

Liabilities are financial obligations. They include your home mortgage, student loans, auto loans and credit card debt.

Calculating Net Worth

Simply put, an individual's net worth is assets minus liabilities. Here’s an example.

Consider someone with the following assets:

  • Primary residence is valued at $250,000
  • A retirement portfolio with a market value of $100,000
  • Automobiles valued at $25,000
  • Total assets equal $375,000

Liabilities include:

  • An outstanding mortgage balance of $100,000
  • A car loan of $10,000
  • Student loan debt of $40,000
  • Total liabilities equal $150,000

The couple’s net worth is $375,000 minus $150,000 or $225,000.

Five years later, their financial position has changed.


  • Property values have risen and the primary residence is now valued at $300,000
  • Retirement portfolio with a market value of $170,000
  • Emergency savings fund of $20,000
  • Automobiles valued at $15,000
  • Total assets equal $505,000


  • Regular mortgage payments have reduced the balance to $80,000
  • Because the car loan was paid off, it is no longer counted as a liability
  • Student loan debt has been reduced to $30,000
  • Credit card debt of $6,000
  • Total liabilities are $116,000

Now, the couple’s net worth is $505,000 in assets minus $116,000 in liabilities or $389,000.

The couple's net worth has gone up by $164,000.

Net Worth Worksheet

Want to calculate your net worth? It’s easy.

The Nerd Wallet Net Worth Calculator allows you to enter values for different types of assets and liabilities.

Calculating your net worth can give you a better sense of your financial status and progress to your goals than looking at your savings in isolation. Interested in figuring out your net worth but working with the numbers makes your skin itch? Give the JRB a call at 888-JRB FREE (572-3733) or send us an email. We’ll gladly work with you to crunch the numbers.


March 2021