Net worth decoded: Here’s how to calculate yours and understand your financial standing

Society often views people as wealthy if they own valuable assets like property or investments. But this doesn’t always reflect their true financial health, as they may also have significant debts.

To get a clear picture of financial well-being, it is important to consider both assets and liabilities — this is where net worth comes in.

How can you calculate your net worth?

Net worth is determined by adding up all the assets a person owns and subtracting their total liabilities. These liabilities may include credit card debt, student loan balances, mortgage balances and other outstanding loans.


In contrast, assets may include bank balances, home equity, investment instruments such as stocks, and other valuable possessions.

To put it in simple terms, net worth is calculated as assets minus liabilities

This figure can be either positive or negative.

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Obviously, it is desirable for a person’s net worth to increase over time. But many people are unsure what their net worth should be at different stages of life.

Net worth calculation: How much should you be worth?

Ignore social media experts, who claim that you need a specific amount of money by a certain age. Because net worth isn’t a fixed benchmark. Everyone’s financial situation is unique, shaped by their own circumstances and choices. There’s no universal number that defines financial success.

But comparing your net worth to the national average can give you a general idea of where you stand.

Average net worth in the US

According to the US Federal Reserve's Survey of Consumer Finances, the average net worth of an American family was $1,059,470 in 2022. The median net worth, though, stood at $192,700.

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Experts suggest that the median figure is a more accurate representation of what can be considered normal.

FAQs

1. How can I calculate my net worth?
You can calculate your net worth by subtracting your total liabilities (debts, loans and mortgages) from your total assets (cash, investments, property and valuables).


2. Why is net worth important?
Net worth gives a clear picture of your financial health. It helps you track progress, set financial goals and make decisions on saving, investing and spending.