What Is Net Worth?
๐ท Net worth is the single number that best captures your true financial position
Net worth is simple: add up everything you own (assets) and subtract everything you owe (liabilities). The result is your net worth. It can be positive, negative, or zero. A positive net worth means you own more than you owe. A negative net worth โ common for young people with student debt โ means your debts currently exceed your assets. Net worth is the truest measure of financial health.
๐ซ Net worth is NOT your salary. A high earner who spends everything has a near-zero net worth. A moderate earner who saves and invests consistently can build a high net worth over time.
| Situation | Assets | Liabilities | Net Worth |
|---|---|---|---|
| Strong position | $350,000 | $80,000 | |
| Starting out | $15,000 | $45,000 | |
| Retired | $800,000 | $0 | |
| Overextended | $200,000 | $210,000 |
Your income tells you what you earn. Your net worth tells you what you've built. Two people can earn the same salary โ one buys depreciating things and carries debt, the other invests and builds equity. Ten years later, their net worths diverge dramatically. Tracking your net worth monthly gives you the clearest picture of whether your financial life is actually improving.
โก Quick Summary
Net worth = total assets minus total liabilities
Tracks financial progress better than income alone
Can be negative early in life โ this is normal with student debt
Goal: grow net worth consistently year by year