What Is Net Worth and Why Should You Track It?

What Is Net Worth?

Your net worth is one of the most important numbers in your financial life — yet most people never think about it. In simple terms, net worth is the difference between what you own (assets) and what you owe (liabilities).

Here's the formula:

Net Worth = Total Assets − Total Liabilities

That's it. If you own a home worth $350,000, have $50,000 in savings, and $30,000 in investments, your total assets are $430,000. If you owe $250,000 on your mortgage and $15,000 in student loans, your total liabilities are $265,000. Your net worth? $165,000.

The number itself matters less than the trend. Whether your net worth is $500 or $500,000, the goal is to see it grow over time.

Why Net Worth Matters More Than Income

Most people measure their financial health by their income. A six-figure salary feels like success. But income is only one side of the equation — your net worth matters more than your salary — what you keep and grow is what really matters.

Consider two people:

Person A earns $150,000/year but has $80,000 in credit card debt, a financed luxury car, and minimal savings. Their net worth might be negative.
Person B earns $65,000/year but has been consistently saving, investing, and paying down their mortgage. Their net worth could be $200,000+.

Who's actually in a better financial position? Person B, by a wide margin. Net worth reveals the truth that income alone cannot.

How to Calculate Your Net Worth

Calculating net worth involves two steps:

Step 1: Add Up Your Assets

Assets include everything of significant value that you own:

Cash & savings — checking accounts, savings accounts, emergency funds
Investments — 401(k), IRA, brokerage accounts, stocks, bonds, mutual funds
Real estate — current market value of your home or rental properties
Vehicles — current market value (not what you paid)
Other valuables — business equity, cryptocurrency, collectibles

Step 2: Add Up Your Liabilities

Liabilities include every debt you owe:

Mortgage balance — what you still owe on your home
Student loans — remaining balance
Auto loans — what you still owe on vehicles
Credit card debt — outstanding balances
Personal loans — any other borrowed money
Medical debt — unpaid medical bills

Subtract liabilities from assets, and you have your net worth.

Why You Should Track Net Worth Regularly

Knowing your net worth once is helpful. Tracking it regularly is transformative. Here's why:

1. It Shows Your True Financial Progress

Paying an extra $500/month toward your mortgage doesn't feel exciting — until you see your net worth climb month after month. Tracking creates a visible record of progress that keeps you motivated.

2. It Catches Problems Early

If your net worth starts declining, that's an early warning sign. Maybe spending crept up, an investment tanked, or debt is growing faster than savings. Without tracking, these problems can compound for months before you notice.

3. It Aligns Your Spending with Your Goals

When you see your net worth regularly, every financial decision carries more weight. That $300 impulse purchase? You'll think twice when you know exactly how it affects your overall wealth trajectory.

4. It Makes Goal-Setting Concrete

"I want to be financially comfortable" is vague. "I want my net worth to reach $500,000 by age 40" is actionable. Tracking gives you a clear scoreboard for your financial life.

Common Net Worth Mistakes to Avoid

Counting depreciating assets at purchase price. Your car loses value every year. Use current market value, not what you paid.

Forgetting retirement accounts. Your 401(k) and IRA absolutely count as assets, even if you can't access them penalty-free for years.

Ignoring small debts. That $2,000 credit card balance matters. Every dollar of debt reduces your net worth.

Checking too frequently. Daily market fluctuations will make your investment values bounce around. Monthly or bi-weekly tracking gives you a clearer picture without the noise.

How to Get Started

The hardest part of tracking net worth is getting started. Try our free net worth calculator to see where you stand right now — it takes less than five minutes. Manually updating a spreadsheet every month works, but most people abandon it within a few months.

That's why tools like Nova exist. By securely connecting to your bank accounts, investment platforms, and loan providers, Nova automatically calculates and updates your net worth in real-time. No spreadsheets, no manual entry, no guesswork.

You get a clear dashboard showing your total net worth, how it's changed over time, and what's driving those changes — all in one place.

The Bottom Line

Your net worth is the single best measure of your financial health. It tells a more honest story than your income, your job title, or your lifestyle. And tracking it consistently is one of the simplest, most impactful things you can do for your financial future.

Start today. Know your number. Explore Nova's features to see how automated tracking keeps you on course — try it free for 30 days. Watch it grow.