What Determines Net Worth And How To Calculate

By on October 26, 2021

A number of factors influence your net worth, a metric used to gauge your financial health. Learning how to calculate net worth gives you a constant pulse on how your assets stand compared to your liabilities (debt). It can be a major factor in helping you make financial decisions at different points in your life. Here’s everything you need to know about what determines your net worth.

So what is net worth exactly and how do you calculate it? We are here to help.

What is my net worth: Net worth explained

Net worth is the difference between your assets and liabilities. If the value of your assets exceeds your liabilities, then you have a positive net worth. Conversely, if your liabilities exceeds your assets, then you have a negative net worth.

Ideally, your net worth grows as you get older. Having a strong net worth is a good indicator that you’re well prepared for both financial emergencies and retirement. And calculating your net worth on a regular basis can help you determine how close you are to reaching certain goals. If your financial picture changes, you can always recalibrate your spending and saving based on new priorities.

How to determine net worth

The formula for calculating your net worth is simple. Just subtract your liabilities from your assets. As an equation, it looks like this: Assets – Liabilities = Net Worth.

When you’re just starting your career, calculating your net worth is typically a lot easier than it is later in life. The median net worth of individuals age 35 or younger is just $13,900.  This makes sense, given assets at that stage of life are often limited to cash, modest retirement accounts/savings, and maybe some home equity. A young adult’s liabilities typically include items such as student loans, auto loans and mortgages.

By the time you’re farther in your career and earning more, you’re also accruing wealth and managing it much differently. Calculating your current or future net worth is less straightforward when you have a variety of asset and liability types. Asset values may change, and your liabilities could increase or decrease depending on your loans and other types of financing at different points in your life. After receiving an inheritance, for instance, an individual’s net worth would jump. But if they finance a vacation home the next year, their net worth statement may drop because of the new mortgage (all other variables remaining equal).

Tangible vs. intangible assets

As you begin to calculate your net worth, start by adding up all of your financial assets. A general net worth includes all of your assets. But you can also calculate your tangible net worth, which focuses solely on physical assets. Tangible assets include cash, real estate property, investments, and personal property that holds value (like art or jewelry).

Intangible assets aren’t physical. This category includes things like intellectual property, copyrights, and patents. Intangible assets aren’t always included in net worth, especially in the eyes of a lender. Although these types of assets hold value, it’s difficult to liquidate them. One could argue that stocks and other investments aren’t liquid, but they’re considered tangible since they can be sold for cash relatively easily.

Types of assets

As you gather the value of your tangible assets and your current financial situation, you can break them into three sub-categories.

Liquid assets include things like cash, your checking and savings account balances, certificates of deposit, and money market accounts.

Investments include stocks, mutual funds, retirement accounts, bonds, annuities, and the cash value of any life insurance policy you hold. Use the current market value of each asset when you calculate your current net worth. Depending on the markets, the value of these financial assets will change over time.

Tangible assets include real estate and personal property. Estimate the value of any homes and land you own. Also include the value of property such as jewelry, art, vehicles, boats, and motorcycles.

For an in-depth current net worth calculation, keep each asset category separate and track how they change over time. This can be helpful in determining how much liquidity you have for future financial needs.

Secured vs. unsecured liabilities

After adding up all of your assets, it’s time to calculate your liabilities to determine your net worth. For a truly accurate net worth, it’s best to check each account balance rather than estimating how much you owe. Create a master list of all your outstanding debts, then check your latest statement for the most recent balance. Repeat this process every time you calculate your net worth so you have a truly accurate understanding of your liabilities.

Types of liabilities

As you gather information on your details, break them into two categories: secured and unsecured. A secured debt means there’s some type of collateral to back the loan while an unsecured debt has no collateral.

The two types of debt aren’t treated differently when calculating your net worth. However, this information does help to assess the “quality” of your liabilities.  Unsecured debt is typically considered risker for a lender and will have higher interest rates because the lender doesn’t have collateral to seize if you default on your loan.

Secured loans include mortgages, home equity financing, auto loans, boat loans, mortgages on vacation or rental properties, and margin loans (loans secured by the holdings in an investment account).

Unsecured loans include credit card debt, student loans, outstanding medical bills, most personal loans, and overdue taxes.

Secured and unsecured loans are weighted equally when calculating your net worth. But categorizing them gives you better insights into your true financial picture, which is really the goal of knowing your net worth.

Ways to track your net worth

Calculating your net worth shouldn’t be a one-time event. Instead, create a system to track and log your net worth. This gives you a historical perspective to not only see where you are today, but also how much progress you’ve made. Tracking your net worth over time also helps you predict the future growth of your wealth.

You can track your net worth either manually through a spreadsheet or through a mobile app or computer software. Each comes with its own pros and cons, so take a few minutes to find out which is the best option for you.


It’s easy to create a net worth spreadsheet. You’ll need to manually update all of your account details, but this can be a good process to ensure every detail is accurate. You can create your own net worth tracker or download a template for your preferred system, such as Excel or Google Docs.

Customize your asset and liability lines, then update the balances every time you want to update your net worth. The spreadsheet can automatically update the sections with formulas, such as total assets, total liabilities, and estimated net worth.

You can create a new tab for each month to give yourself a long-term picture of your net worth trends. Some templates may even have an automated graphing function to track your net worth on a monthly or annual basis.

Mobile app/computer software

If you prefer an automated approach to tracking your net worth, try using a mobile app or computer software program. These platforms typically allow you to link your bank and brokerage accounts so you can see all of your current balances in one place. The drawback is that these automated programs don’t include certain assets and liabilities. You may need to manually account for some missing pieces, such as your mortgage and equity, personal property, and any loans that don’t connect to the app.

The benefit, however, is that you can get a general overview of your net worth in real-time any day of the week with little effort on your part. Software programs aren’t as convenient as mobile apps, but they do frequently come with more features to analyze your net worth.

Bottom line

No matter what method you choose for tracking your net worth, it’s a good habit to get into. Working with an expert financial advisor can also help you navigate the process, especially as your wealth becomes more complex. If you are wondering what your net worth should be or how to increase it, seeking financial planning services can help.

Dowling & Yahnke Wealth Advisors always provides regular check-ins to review your investments and your overall net worth. Together, you can prioritize your financial goals and create a plan to achieve them.

Schedule an appointment with Dowling & Yahnke Wealth Advisors to get professional help managing and growing your net worth.


Erik H. Nelson, CFP®, CPWA®, Promoted to Director of Financial...

Read Now


Read Now
Suburban townhomes California

California Senate Bill 9 (SB 9): Converting Single Family Lots...

Read Now


Discover the people who make Dowling & Yahnke one of San Diego’s top wealth management firm.



Our team is available now to discuss all of your financial goals.