How it works
Net worth is everything you own minus everything you owe. It is the single best snapshot of your overall financial position, and tracking it once or twice a year shows whether you are moving forward.
Use current market values for assets: what your home and car would sell for today, and current account balances. For debts, use the payoff balance, not the original loan amount.
A negative net worth is common early in a career, especially with student loans. The direction it is heading matters more than the number itself.
Formula
Net worth = total assets − total liabilities
Questions people ask
Should I include my home in net worth?
Yes, at its estimated market value, with the mortgage listed as a liability. Some people also track net worth excluding the home, since you cannot easily spend home equity.
Should retirement accounts count?
Yes. Keep in mind traditional 401(k) and IRA balances are pre-tax, so their spendable value is lower after income tax.
What is a good net worth for my age?
One rough benchmark is age × pre-tax income ÷ 10. Benchmarks vary widely; comparing your own progress year to year is more useful.