Net worth is the single most comprehensive snapshot of your financial health. Unlike income (which measures cash flow) or credit score (which measures borrowing behaviour), net worth captures everything at once: what you own, what you owe, and what would be left if you settled every debt today.
The Formula
Net worth = Total assets − Total liabilities
It's genuinely that simple. The difficulty is being honest and thorough about what goes into each side.
Step 1: List Your Assets
Assets are everything you own that has financial value. Be thorough — most people underestimate this side.
Liquid assets (can be converted to cash quickly):
- Current accounts and savings accounts
- Cash ISAs (UK) / savings accounts (US)
- Premium Bonds (UK)
- Stocks, shares, ETFs, mutual funds in taxable accounts
Retirement accounts (less accessible but still yours):
- Workplace pension — check your latest statement for current value
- SIPP or personal pension (UK)
- 401(k), IRA, Roth IRA (US)
- State pension entitlement — harder to value but can be estimated
Property:
- Primary residence (estimated market value, not purchase price)
- Buy-to-let or investment properties
- Land
Other assets:
- Vehicles (use realistic resale value, not what you paid)
- Business ownership (estimated value)
- Valuable collections, jewellery, art (insured value is a reasonable proxy)
Commonly forgotten assets:
- Employee share schemes (vested shares only)
- Defined benefit pension — value as 20× annual pension entitlement (rough rule of thumb)
- Overpaid tax awaiting refund
Step 2: List Your Liabilities
Liabilities are every financial obligation you have — money you owe to anyone.
Secured debt (backed by an asset):
- Mortgage balance (remaining amount owed, from your latest statement)
- Car finance or PCP agreement balance
- Secured loan balance
Unsecured debt:
- Credit card balances (all of them, including any 0% promotional)
- Personal loans
- Student loans (note: UK student loans are income-contingent and many argue they don't function like traditional debt)
- Overdrafts
- Money borrowed from family or friends
- Buy Now Pay Later balances
Tax liabilities:
- Estimated tax bill if you're self-employed
- Capital gains tax owed on appreciated assets (if you were to sell them)
Step 3: Calculate
| Assets | Value | |--------|-------| | Current account | £3,200 | | Savings account | £18,500 | | Stocks & ISA | £24,000 | | Workplace pension | £87,000 | | Home (estimated value) | £340,000 | | Car (resale value) | £8,500 | | Total assets | £481,200 |
| Liabilities | Balance | |-------------|---------| | Mortgage | £212,000 | | Car finance | £4,200 | | Credit card | £1,400 | | Total liabilities | £217,600 |
Net worth = £481,200 − £217,600 = £263,600
How to Interpret the Number
Positive net worth means assets exceed liabilities. Most people who have worked for more than a few years and avoided significant debt will be here.
Negative net worth is common early in adult life, especially with a mortgage before equity has built up, or after accumulating student debt. It is not a crisis — trajectory matters more than the current number.
What's a "good" net worth? This varies enormously by age, income, country, and life stage. Comparing to averages is less useful than comparing your number today to your number 12 months ago. The trend is what matters.
According to the ONS (2022), UK median household net worth is approximately £302,500 — heavily skewed by housing wealth. The median for those under 35 is around £15,000.
Why Income Doesn't Tell the Whole Story
Two people can earn the same salary and have wildly different net worths:
- One saves and invests consistently → net worth grows
- One spends everything and carries debt → net worth stagnates or falls
Net worth is the output of income, spending, and investment decisions compounded over years. It's more honest than income alone.
Tracking Net Worth Over Time
Calculate your net worth once, then track it regularly — quarterly is a good cadence. What you're looking for:
- Is it growing? In most years, it should be.
- What's driving the change? Saving, investment returns, debt repayment, or property appreciation?
- Are liabilities falling? Total debt should trend down unless you're deliberately using leverage for investment.
A spreadsheet with dated snapshots is sufficient. Apps like MoneyHub (UK) or Personal Capital (US) automate data collection.
Quick Levers to Improve Net Worth
Increase assets:
- Save a higher percentage of income (even £100/month compounds significantly)
- Invest in ISAs, pensions, or index funds to grow assets tax-efficiently
- Build skills or a business with equity value
Reduce liabilities:
- Pay down high-interest debt first (credit cards typically 20–30% APR)
- Avoid lifestyle debt (car finance, BNPL) that depreciates faster than you repay it
Use our Net Worth Calculator to calculate yours in under 5 minutes and track it over time.