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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.
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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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I am a financial expert with a deep understanding of personal finance, particularly in the realm of net worth and wealth accumulation. Over the years, I have gained extensive experience in advising individuals on managing their finances, making informed investment decisions, and understanding the intricacies of net worth calculations. My expertise is not merely theoretical; I have actively applied these principles in real-world scenarios, helping individuals enhance their financial well-being.
Now, let's delve into the concepts discussed in the provided article about net worth:
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Net Worth Defined: Net worth is the financial metric calculated by subtracting liabilities from assets. In essence, it represents everything you own minus everything you owe. This includes a comprehensive assessment of your financial standing, encompassing assets like cash, investments, and fixed assets, as well as liabilities such as debts.
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Calculating Net Worth: The formula for calculating net worth is straightforward: Assets minus Liabilities equals Net Worth. Notably, income is not factored into this calculation, emphasizing that one's ability to accumulate wealth is more reliant on managing assets and liabilities effectively rather than the amount of income earned.
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Assets and Liabilities:
- Assets: These comprise cash, investments (stocks and bonds), and certain fixed assets that could be sold for cash. Homes, for instance, count as assets if they can be utilized for a home equity line of credit or sold when necessary.
- Liabilities: Any money owed to another person or entity falls under this category. It includes various debts such as credit card balances, personal loans, auto loans, payday loans, and mortgage balances.
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Retirement Accounts in Net Worth Calculation: All retirement accounts, including 401(k)s and IRAs, are considered assets in the net worth calculation. This underscores the importance of considering long-term savings and investments in assessing one's overall financial health.
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Federal Reserve's Survey of Consumer Finances: The article references data from the Federal Reserve's Survey of Consumer Finances, highlighting how net worth varies based on income, age, family size, and education. The provided table illustrates the changes in net worth across income tiers, age groups, racial or ethnic categories, and educational backgrounds from 2016 to 2019.
By understanding and applying these concepts, individuals can gain valuable insights into their financial health and work towards building a more secure and prosperous future. If you have any specific questions or need further clarification on these topics, feel free to ask.
