The simplest definition

Net worth is everything you own, minus everything you owe. That's it.

Add up your assets - your savings, your home, your car, your investments, anything that has value. Then subtract your debts - your mortgage, loans, credit cards. What's left is your net worth. It can be positive or negative, and both are completely normal depending on where you are in life.

For example: say you have a home worth $400,000, a car worth $15,000, and $20,000 in savings - but you owe $250,000 on your mortgage and $2,000 on a credit card. Your net worth is $183,000.

What counts as an asset?

Anything you own that has value:

You don't need exact figures. A reasonable estimate is completely fine - the goal is a clear overall picture, not a forensic audit.

What counts as a liability?

Anything you owe:

Why is net worth more useful than income?

Income tells you how much comes in each month. Net worth tells you how much has actually built up over time. They're very different things.

Someone earning a lot can have a low - or even negative - net worth if their spending keeps pace with their income. On the flip side, someone on a modest income who saves and invests consistently can build real wealth over time. Net worth is the honest scorecard.

Income is a rate. Net worth is the result. And the result is what tells you whether everything is actually working.

Why the trend matters more than the number

A single net worth snapshot is interesting. A series of them over months and years is genuinely powerful. The direction of travel is what you're really watching.

Is it growing? Good - something's working. Flat? Worth understanding why. Shrinking? That's a signal worth paying attention to sooner rather than later.

Tracking regularly turns a vague feeling of "I think I'm doing okay" into something concrete and real. That's surprisingly reassuring - even when the number isn't as big as you'd like yet.

What's a "good" net worth?

Honestly? There's no universal answer, and comparing yourself to others isn't very useful. What matters is whether yours is growing relative to your own goals and where you are in life.

A negative net worth isn't something to be ashamed of - for a lot of people it's just the starting point. Student debt, a new mortgage, early career savings - these all affect the number. What matters is the direction you're heading.

How often should you update it?

Once a month works well for most people. Frequent enough to stay aware, not so frequent that you're reacting to daily noise. Pick the same day each month, make it a habit, and you'll have a running picture of your financial life that actually means something.