EyeOnWhat it means
Assets include cash, savings, investments, pension balances, property and other items of value. Liabilities include mortgages, loans, card balances and other debts.
If assets total 40,000 and liabilities total 25,000, net worth is 15,000. It can also be negative, which is common for people early in their careers or those with student debt or a large mortgage.
How it works
Net worth is a snapshot, not a score. It moves as asset values change and as debts are repaid. Looking at the trend over months or years is usually more informative than one figure.
Some people count only items they could realistically sell or access; others include everything. Choosing a consistent method is more important than the method itself.
A simple example
A person owes 25,000 in total. After a year of repayments they owe 22,000, and their savings have risen from 5,000 to 6,000, with other assets unchanged. Net worth has risen by 4,000: 3,000 less debt plus 1,000 more savings. The figure is useful for seeing direction of travel.
Things worth checking
- Use realistic values for property and possessions.
- Pension values and investments change, so note the date of each figure.
- A low or negative figure is not a judgement; many people start there.
- Net worth ignores income, which is a separate part of the picture.
How it varies by country
Which items count, and how they are valued, can depend on local property markets, pension systems and tax rules.