MoneyLifeCalcA budget tells you about one month. An investment statement tells you about one account. Net worth is the one figure that takes in everything at once, and writing it down regularly is a simple way to see whether your plans are working.
What net worth is
Net worth is everything you own minus everything you owe. That is the whole definition. If you sold all of your assets today and paid off every debt, net worth is what would be left.
What to count as assets
- Cash: checking, savings, money market accounts, and CDs.
- Retirement accounts: 401(k)s, IRAs, and similar plans, at their current balance.
- Other investments: brokerage accounts, and the cash value of any life insurance that has one.
- Your home and other real estate: at a realistic current value.
- Vehicles: at what they would sell for today.
Most people leave out furniture, clothing, and electronics. They are hard to value and worth little when sold, and including them only adds noise.
What to count as debts
- Mortgage and home equity loan balances
- Car loans and student loans
- Credit card balances, including ones you plan to pay off this month
- Personal loans, medical payment plans, taxes owed, and money owed to family
Use the balance you owe, not the monthly payment.
Value things honestly
The two places people fool themselves are the house and the car. For a home, use a recent, sober estimate, and consider subtracting about 6% for what it would cost to sell. For a car, use a current resale value, which is lower every year. An optimistic home value makes the whole picture look better than it is, and it also hides real progress, because you cannot tell which changes came from your own saving.
Whatever method you choose, use the same one every time. Consistency matters more than precision, because the point is to compare one month with another.
A worked example
The example in our Net worth tracker owns $578,000: $15,000 in the bank, $120,000 in retirement accounts, $25,000 in a brokerage account, a $400,000 home, and an $18,000 car. It owes $275,000: a $260,000 mortgage, a $12,000 car loan, and $3,000 on cards. Net worth is $303,000.
Two other figures are worth a look. Debts are 48% of assets, a share that should fall over time. And only $40,000 of the $578,000 is in accounts that could be reached quickly. A household can have a healthy net worth and still be short of cash, which is why an emergency fund is measured separately.
How often to record it
Once a month is plenty, and once a quarter works too. Choose a regular day, look up each balance, and press the record button. The tracker keeps one record per month and shows the change since the last one. After the first time, it takes about fifteen minutes.
Checking more often than monthly does not help. Investment values move every day, and daily movement says nothing about your progress.
How to read the trend
- Look at a year, not a month. A single month can drop because the market did. Twelve records show the direction.
- Notice what caused the change. Net worth rises for three reasons: you saved, you paid down debt, or your investments and home gained value. The first two are yours to control.
- Do not be discouraged by a negative number. Many people start below zero because of student loans or a new mortgage. The direction is what counts.
How it fits with the other tools
A yearly ledger records the money going out. Net worth records what all of that adds up to. If you want to follow your investment accounts more closely, separating market movement from your own deposits, the Portfolio tracker does that. And once a year, compare your net worth with the path your retirement plan assumed. A yearly comparison like that keeps a long-term plan honest.
Keep it private
You do not need to hand over bank logins to know your net worth. Our tracker never connects to your accounts. Your figures are saved only in your own browser, so download a backup file now and then from Your data and backups.