Net Worth: What It Is and How to Calculate It(Akhilesh Ganti)

Net Worth: What It Is and Howto Calculate It

By Akhilesh Ganti

UpdatedOctober 05, 2025

Reviewed by Andy Smith

Fact checkedby AmandaBellucco-Chatham

Fact checked by Amanda Bellucco-Chatham

Full Bio
AmandaBellucco-Chatham is an editor, writer, and fact-checker with years ofexperience researching personal finance topics. Specialties include generalfinancial planning, career development, lending, retirement, tax preparation,and credit.

Definition
Net worth is the monetaryvalue of the assets owned by an individual or business entity after subtractingthe total value of their liabilities.

What Is Net Worth?

Net worth is the differencebetween what a person or company owns and what they owe. It provides a snapshotof financial health and is often used to determine eligibility for specificinvestments or loans, such as hedge funds, structured products, or alternativeinvestments. In popular culture, net worth isalso used to rank the wealth of public figures and celebrities.

Key Takeaways

Net worth compares assets to liabilities.
A positive net worth is healthy, a negative net worth is not (although it may be temporary).
Individuals, corporations, sectors, and even countries can have a net worth.
In business, net worth is commonly referred to as book value or shareholders’ equity.
People with substantial net worth are called high-net-worth individuals (HNWI).

Knowing your net worth helpsyou understand your current financial situation and plan accordingly for thefuture.
Joules Garcia / Investopedia

How to Calculate Net Worth

Net worth is calculated bysubtracting all liabilities from all assets.

Assets - Liabilities = Net Worth

An asset is anything ownedthat has monetary value. Liabilities are obligations that deplete financialresources. They include loans, accountspayable (AP), and mortgages.

Net worth can be described aseither positive or negative:

Positive net worth means that assets exceed liabilities.
Negative net worth indicates that liabilities exceed assets.

Positive and increasing networth indicates good financialhealth. Decreasing net worth is cause for concern because it might signal adecrease in assets relative to liabilities.
The best ways to improve networth are to reduce liabilities while assets stay constant or rise in value, orincrease assets while liabilities remain constant or decrease.

Tip
Keeping track of your networth over time is a good way to keep the focus on your efforts to save and tocontrol your spending. Knowing your net worth and which way it's moving givesyou a perspective on changes you may need to make for your financial goals andsecurity.

Negative Net Worth

A negative networth results when the value of your debts exceeds the value of yourassets. So, for example, your networth will be negative if the sum of your credit card bills, utility bills,outstanding mortgage payments, auto loan bills, and student loans is greaterthan the sum of your cash, savings, investments, and other property.

Negative net worth is a signthat an individual or family needs to focus its energy on debt reduction. Atough budget, the use of debt reduction strategies (like the debtsnowball or debt avalanche), and perhaps debt negotiation can sometimeshelp people climb out of a negative net worth hole and start building up theirfinancial resources.

It's Not Uncommon

A negative net worth isn’tuncommon early in life. Student loans mean that even those young people who arecareful with their money can start out owing more than they own.
Family responsibilities or anunexpected illness can also push people into the red.
Filingfor bankruptcy protection to eliminate some of the debt and preventcreditors from trying to collect on it might be the most appropriate solutionwhen nothing else has worked.

Some liabilities can’tbe discharged, however. They include child support, alimony, taxes, andoften studentloans. And many types of bankruptcy will stay on an individual’s credit report for10 years.1

Net Worth in Business
Net worth is known as bookvalue or shareholders’equity in business. A company's balance sheet isalso known as a net worth statement.

The value of a company’sequity equals the difference between the value of total assets and totalliabilities. The values on a company’s balance sheet highlight historical costsor book values rather than current market values.

Lenders scrutinize abusiness’s net worth to determine whether it’s financially healthy. A creditor mightnot be too confident in a company’s ability to repay its loans if totalliabilities exceed total assets.

A consistently profitablecompany will register a rising net worth or book value providedthat these earnings aren’t fully distributed to shareholders as dividends.

A rising book value willoften be accompanied by an increase in the value of a public company’sstock price.

Fast Fact
Net worth can apply toindividuals, companies, sectors, and even countries, and is sometimes referredto as net wealth.

Net Worth in Personal Finance

Anindividual's net worth is the value that's left after subtractingliabilities from assets.
Liabilities include debtssuch as mortgages,credit card balances, student loans, auto loans, and outstanding bills ortaxes.

Assets include checking andsavings balances, retirement and taxable investment accounts, real estate, andthe marketvalue of automobiles.

A person's net worth is theamount remaining after selling all assets and paying off personal liabilities.Usually, though, net worth is calculated by simply adding up the value ofassets and then subtracting the amount of liabilities from that figure.

People with substantial networth are known as high-net-worthindividuals (HNWIs). They are the target market for certain wealth managersand investment advisors.

Investors with net worths ofat least $1 million either alone or together with their spouse and excludingtheir primary residences are "accredited" investors in the eyes ofthe Securities andExchange Commission (SEC). That means they’re permitted to invest in unregisteredsecurities offerings.

Exampleof Net Worth

Consider a couple with thefollowing assets:

Primary residence valued at $250,000
An investment portfolio with a market value of $100,000
Automobiles and other assets valued at $25,000

Liabilities are:

An outstanding mortgage balance of $100,000
A car loan of $10,000

The couple’s net worth wouldtherefore be calculated like this:
($250,000 + $100,000 +$25,000) - ($100,000 + $10,000) = $265,000

Assume that the couple'sfinancial position changes five years later. Their residence's value is$225,000, their investment portfolio is $120,000, their savings total $20,000,and their automobile and other assets are valued at $15,000.

Their mortgage loan balanceis $80,000, and the car loan is $0 because it was paid off. Their net worthwould be:
($225,000 + $120,000 +$20,000 + $15,000) - $80,000 = $300,000

The couple’s net worth hasgone up by $35,000 despite the decrease in the value of their residence andcar.
These declines were more thanoffset by an increase in their investment portfolio's value and their savingsplus the drop in liabilities.

What Is a Good Net Worth?

Agood net worth varies for every individual according to their lifecircumstances, financial needs, and lifestyle. The latest data from the FederalReserve puts median net worth of a family in the United States at $192,700 in2022.2 However, that number is expected to change in late 2026, based onupdated data from the most recent Federal Reserve survey results.3
How Do I Calculate My NetWorth?
Simply subtract your total liabilities from your total assets. Your total assets include everything youown with a monetary value—your investments, savings, cash deposits, and anyequity that you have in a home, car, or other similar assets. Total liabilities include any debt, such as student loans and credit card debt.
How Much Should I Have Saved?
What you should have saveddepends on your age, your career, your lifestyle, and your life’s circumstances. Fidelity recommends having saved three times your annual salary across all of your retirement accounts by the time you’re 40.4

How Many People in America Are Considered High-Net-Worth?

High-net-worth individualshave at minimum $1 million in liquid financial assets. The United States had22.7 million HNWIs in 2025.5

The Bottom Line

Net worth is a good way toassess the true wealth ofan individual or business. Looking only at someone’s assets can be misleadingbecause this total is often offset by some amount of debt and otherliabilities.

You can growyour net worth by increasing the value of your assets and reducingyour liabilities.

The complete linkage is as follows.

https://www.investopedia.com/terms/n/networth.asp?hid=826f547fb8728ecdc720310d73686a3a4a8d78af&did=21060243-20260103&utm_campaign=investopedia-term-of-the-day_newsletter&utm_source=investopedia&utm_medium=email&utm_content=010326&lctg=826f547fb8728ecdc720310d73686a3a4a8d78af&lr_input=46d85c9688b213954fd4854992dbec698a1a7ac5c8caf56baa4d982a9bafde6d

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