How do I calculate my net worth and why does it matter?

Net worth is everything you own minus everything you owe. It matters because income measures flow while net worth measures accumulation — and it's entirely possible to have a high income and a negative net worth, which is a situation income alone will never reveal. **The calculation:** *Assets* — cash and bank balances, investments (stocks, funds, retirement accounts), property at realistic current value, vehicles at resale value, and any money genuinely owed to you. Value things at what you could actually sell them for today, not what you paid. *Liabilities* — mortgage balance, car loan, student loan, credit card balances, personal loans, any money you owe family. *Net worth = assets − liabilities.* A negative number early in life, particularly with student debt, is completely normal and not a failure. The direction of travel matters far more than the level. **What to include and what to skip**: don't count furniture, clothes or electronics — they're worth little on resale and inflate the number misleadingly. Some people exclude their primary home and its mortgage to get a clearer view of liquid wealth; both approaches are fine as long as you're consistent. **Why it's the better number to track:** 1. **It captures the whole picture.** Two people earning identically can have wildly different positions depending on debt and savings behaviour. 2. **It shows whether you're actually progressing.** Income can rise for years with no accumulation. Net worth won't let you fool yourself. 3. **It reveals what's driving change** — is it your contributions, market movement, or debt reduction? 4. **It's the input to any real planning.** Retirement targets, financial independence, and major decisions all depend on it. **How to use it practically:** - **Calculate it quarterly**, not daily. Frequent checking encourages reacting to market noise. - **Track it in a simple spreadsheet** with one row per quarter. The trend line over years is the point. - **Expect it to fall sometimes.** Market downturns reduce it temporarily, and that's not a signal to act if your horizon is long. - **Watch your savings rate alongside it**, since that's the part you control. The most useful thing about the exercise is often the first time you do it — most people discover something they'd been avoiding looking at, and that clarity is worth the twenty minutes.