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Net worth defined
Net worth is assets minus liabilities. Or, you can think of net worth as everything you own less all that you owe. Find your net worth by using our net worth calculator.
What is my net worth?
To calculate your net worth, take inventory of what you own, as well as your outstanding debt. And when we say own, we include assets that you may still be paying for, such as a car or a house.
For example, if you have a mortgage on a house with a market value of $200,000 and the balance on your loan is $150,000, you can add $50,000 to your net worth.
Basically, the formula is:
ASSETS minus LIABILITIES equals NET WORTH
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Calculating net worth: What are assets and liabilities?
If you’re not sure what assets and liabilities are, here are some guidelines:
Assets: Assets include cash — such as in your checking, savings and retirement accounts — and certain investments, such as stocks and bonds, that you could sell for cash. These are often referred to as liquid assets.
Some fixed assets can count toward your net worth calculation, too, provided you can or would sell them if needed. For example, your home would count toward your net worth if you’re willing to use it for a home equity line of credit or sell it should the need arise.
Liabilities: Any money you owe to another person or entity falls under this category. That includes revolving consumer debts — such as credit card balances — as well as personal, auto, payday and title loan balances. If you’re using your home as an asset, its mortgage counts as a liability as well.
Do you include a 401(k) in a net worth calculation?
All of your retirement accounts are included as assets in your net worth calculation. That includes 401(k)s, IRAs and taxable savings accounts.
Net worth calculator
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Compare your net worth
The Federal Reserve releases its Survey of Consumer Finances every three years — the most recent report was issued in September 2020 with data from a survey fielded in 2019. Here’s how net worth stacks up by income, age, family size and education, and how it has changed since 2016.
Net worth of U.S. families by income
Income tier | 2016 | 2019 | Change 2016-2019 | |
|---|---|---|---|---|
Less than $20,000 | $7,100 | $9,800 | 37% | |
$20,000 to $39,900 | $31,500 | $44,000 | 40% | |
$40,000 to $59,900 | $94,200 | $92,900 | -1% | |
$60,000 to $79,900 | $181,500 | $199,100 | 10% | |
$80,000 to $89,900 | $421,700 | $382,300 | -9% | |
$90,000 to $100,000 | $1,732,300 | $1,589,300 | -8% | |
All families | $103,500 | $121,700 | 18% | |
Net worth of U.S. families by age
Age tier | 2016 | 2019 | Change 2016-2019 |
|---|---|---|---|
Less than 35 | $11,700 | $13,900 | 19% |
35–44 | $63,600 | $91,300 | 44% |
45–54 | $132,100 | $168,600 | 28% |
55–64 | $199,200 | $212,500 | 7% |
65–74 | $237,600 | $266,400 | 12% |
75 or more | $281,600 | $254,800 | -10% |
All families | $103,500 | $121,700 | 18% |
Net worth of U.S. families by race or ethnicity
Race or ethnicity | 2016 | 2019 | Change 2016-2019 | |
|---|---|---|---|---|
White non-Hispanic | $181,900 | $188,200 | 3% | |
Black or African Americannon-Hispanic | $18,200 | $24,100 | 33% | |
Hispanic or Latino | $21,900 | $36,200 | 65% | |
Other or multiple race | $68,800 | $74,500 | 8% | |
All families | $103,500 | $121,700 | 18% | |
Net worth of U.S. families by education
Education | 2016 | 2019 | Change 2016-2019 | |
|---|---|---|---|---|
No high school diploma | $24,300 | $20,500 | -16% | |
High school diploma | $71,300 | $74,000 | 4% | |
Some college | $70,200 | $88,800 | 26% | |
College degree | $310,700 | $308,200 | -1% | |
All families | $103,500 | $121,700 | 18% | |
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As a financial expert with a deep understanding of personal finance, let's delve into the key concepts outlined in the provided article.
The article revolves around the fundamental financial concept of "net worth," which is a crucial indicator of an individual's or a family's financial health. Net worth is defined as the difference between assets and liabilities. Here's a breakdown of the key concepts used in the article:
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Net Worth Calculation:
- Definition: Net worth is calculated by subtracting liabilities from assets. The formula is stated as "ASSETS minus LIABILITIES equals NET WORTH."
- Example: If you have a house with a market value of $200,000 and a mortgage balance of $150,000, your net worth increases by $50,000 ($200,000 - $150,000).
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Components of Net Worth:
- Assets:
- Definition: Assets include cash in checking, savings, retirement accounts, and investments like stocks and bonds.
- Noteworthy: Some fixed assets like a home can contribute to net worth if they can be sold or used for a home equity line of credit.
- Liabilities:
- Definition: Liabilities encompass money owed to others, including credit card balances, loans (personal, auto, payday, and title), and mortgage debt.
- Note: Mortgage debt is considered a liability even if the property is also an asset.
- Assets:
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Inclusion of Retirement Accounts:
- All retirement accounts, including 401(k)s and IRAs, are considered assets in the calculation of net worth.
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Exclusion of Income from Net Worth Calculation:
- Income is not a factor in the net worth calculation. A person with a high income may still have a low net worth if they spend most of their earnings.
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Factors Influencing Net Worth:
- The article emphasizes that individuals with modest incomes can accumulate significant wealth and achieve a high net worth through wise financial decisions, such as investing in appreciating assets and practicing prudent saving habits.
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Net Worth Trends:
- The article provides data from the Federal Reserve's Survey of Consumer Finances, showing how net worth varies across income levels, age groups, racial or ethnic categories, and education levels.
- The data indicates changes in net worth from 2016 to 2019, highlighting trends and disparities in wealth accumulation.
In conclusion, understanding and regularly assessing one's net worth is essential for financial planning and gauging overall financial well-being. It involves a comprehensive analysis of assets and liabilities, with considerations for various financial instruments and demographic factors that can impact net worth.
