What’s Your Net Worth? How to Calculate It

Various numbers scattered across an orange background

Even if you’ve never considered your own net worth, you know that some of the most recognizable names on the planet have staggering wealth figures. Oprah Winfrey is worth a cool $2.6 billion. Jeff Bezos, the itinerant founder of Amazon, makes Oprah look like a peasant with his $113.5 billion valuation.

Even if we can’t catch up to Oprah and Bezos, we can do our best to map our financial futures before and after retirement. Think of your net worth as the GPS for your savings. Are you on track to the type of retirement you want or the type of retirement you can barely enjoy?

What Determines Net Worth?

In its simplest terms, net worth is the total value of your assets minus your debts.

Net Worth = Assets – Liabilities

This is a valuable number to understand, but it’s not the only important data point to consider. Many different, evolving factors contribute to your net worth, some of which can change very quickly.

Just like you shouldn’t check the scale three times a day when you’re trying to lose weight, you don’t need to obsess over your net worth as you aim to build your savings and pay down your debts. Instead, use your net worth as a North Star to keep you working in the right direction.

Calculating Net Worth

As long as you’re in-tune with your income, investments, and debts, you can calculate your net worth right there at your kitchen table. You can even do it online.

Start by listing the value of all of your assets. If it can somehow be converted into cash, it’s an asset. This includes:

  • Real estate
  • Automobiles
  • Checking accounts
  • Savings accounts
  • Retirement accounts
  • Business interests
  • Valuable personal property (jewelry, art, furniture)
  • Insurance policies

That combined value shows all of your assets, but that’s not your total valuation. Now it’s time to calculate your liabilities. A liability is anything you’re currently paying off or owe:

  • Mortgages
  • Consumer debt
  • Personal loans
  • Student loans
  • Auto loans

Remember, the formula is simple:

Assets – Liabilities

If your combined assets total $700,000 and your liabilities total $300,000, then your current valuation is $400,000.

What’s the Ideal?

Like most questions in personal finance, there’s not a single correct answer to this query. Net worth fluctuates based on age, geography, and other demographic factors. People living in the Northeast, for example, tend to have a higher average than their peers in the South because they must make and pay more money for nearly the same standard of living.

The Federal Reserve offers a quick glimpse into the average net worth by age group. Among adults aged 40-44, the average is $316,661. If you think this average sounds awfully high, you’re right. It only takes a few very wealthy people to skew the data.

It’s probably more helpful to look at the median worth. For adults aged 40-44, the median is $87,843. This means that half of the adults in that age group have a worth less than $87,843, and half have a higher worth.

For adults under 35, the median is $11,100 while the average is $76,200.

Of course, this is only a general benchmark, not a one-size-fits-all recommendation. It’s still important to consider the many factors that influence your valuation behind the scenes, including your debt payoff strategies, income growth, and spending habits. Something as simple as refining your budget can help you reach your financial goals with ease.