Assets and Liabilities
Know where you stand by adding what you own, subtracting what you owe, and tracking net worth.
TL;DR
- Total every
assetyou own into one clear number. - Total every
liabilityyou owe into another number. - Subtract debts from assets to get
netWorth.
Add Up What You Own
Cash & SavingsTotal your checking, savings, and emergency fund balances.
Checking + savings + cash = $8,000InvestmentsAdd retirement accounts and any brokerage balances at current value.
401(k) + IRA + brokerage = $22,000PropertyCount the resale value of your home, car, and valuables.
Car resale $12,000, not $28,000 newMoney Owed to YouInclude loans to others or a deposit you expect back.
Security deposit $1,500 countsAdd Up What You Owe
Credit CardsTotal every card balance you are currently carrying.
Card 1 $2,400 + card 2 $600 = $3,000LoansAdd your student, auto, and personal loan balances.
Student $18,000 + auto $9,000MortgageInclude the remaining balance owed on your home loan.
Mortgage still owed = $185,000Unpaid BillsCount overdue bills or a medical balance you still owe.
Past-due + medical = $700Calculate Your Net Worth
The FormulaSubtract your total liabilities from your total assets.
assets - liabilities = net worthPositive or NegativeA number below zero just means debt leads for now.
$42,000 - $215,000 = -$173,000Track MonthlyRecord the total on the same fixed day each month.
Log net worth on the 1stCompare Over TimeLine up the monthly numbers to see the real trend.
Jan $4,000 -> Jun $9,000Read the Trend
Direction FirstWatch whether the number rises over time, not how big it is.
Up $600 this month = progressBenchmarksCompare against a simple age-based rule of thumb for context.
Rough target: 1x salary by 30Grow the GapRaise assets and shrink debts to widen net worth faster.
Save more + pay down = bigger gapIgnore the NoiseDo not panic over small dips from normal market swings.
Market dip? Watch the year, not dayTips
- Update your
netWorthon the same day each month, so you compare a real trend instead of random daily swings. - Count only the resale value of an
assetlike a car, not the price you paid or the loan you still owe.
Warnings
- Do not panic over a negative
netWorth; new graduates often owe more than they own, and the trend matters most. - Never inflate assets with sentimental value; a
liquidAssetis worth only what a buyer would actually pay today.
In Practice
List what you own and owe to get one honest number to grow from.
You have some savings and investments but also a student loan and a car loan.
- Total assets: $6,000 cash + $14,000 retirement + $11,000 car = $31,000.
- Total liabilities: $19,000 student loan + $8,000 car loan = $27,000.
- Subtract: $31,000 - $27,000 = $4,000 net worth.
- Log it on the 1st, then track whether it climbs each month.
Your net worth is $4,000, and the goal is to grow it monthly.
One honest number beats a vague feeling about your finances.
FAQ
Net worth is everything you own minus everything you owe. Add up your assets like cash, savings, and investments, then subtract your liabilities like loans and card balances. The result is one number that shows your true financial position.
Not necessarily. Many people start negative, especially with student loans or a new mortgage. What matters is direction. If your netWorth climbs month over month, you are winning, even while the number is still below zero.
Once a month is plenty. Pick a fixed day, list your balances, and record the total. Checking daily just adds stress from normal market swings. A monthly netWorth snapshot shows the trend without the noise.
Include them at honest resale value, and list the matching loan as a liability. A $20,000 car with a $15,000 loan adds $5,000 of equity, not $20,000. Only count what you could actually sell it for.