Are You Tracking Your Net Worth? Here’s Why You Should Be

This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.

Staying informed about your net worth can help you understand whether your financial situation is improving. Learn more here about how to do it — and why. 

The median net worth in the United States was $192,700 in 2022, with net worth tending to increase with age. In fact, the median net worth of Americans under 35 was $39,040, while the median among Americans aged 65 to 74 was $410,000.

Do you know what your net worth is or how it compares to your fellow Americans? If you don’t, you should. Your net worth is one of the most important financial numbers in your life.

Unfortunately, many people aren’t aware of this number or how to calculate it. In fact, one study found as many as 51% of people were unaware of how to figure out what their net worth was, including around 61% of women and 40% of men.

If you are one of the many Americans who don’t know their net worth, or why you should track it, here’s some insight into why this number is so important and how to figure out yours.

What is your net worth?

Your net worth can help you measure your financial situation by looking at the big picture. Basically, to determine it, you’d add up the value of all your assets (the stuff you own) and subtract the total amount of your liabilities (your debts and obligations).

So, for example, you’d want to add up how much money is in your checking account, savings account, brokerage accounts, and other investment accounts. And you’d want to estimate how much your home, car, and other personal property is worth. Then, you’d subtract the debt owed on your credit cards, personal loans, car loan, mortgage, and any other debts. Here’s an example:

Say you own the following assets:

A home valued at $550,000A car valued at $30,000A 401(k) with a $35,000 balanceA checking account with $15,000Personal property (like furniture and jewelry) worth $75,000

And you have the following debts:

A $475,000 mortgageA $15,000 car loanA $5,000 personal loanA $2,000 credit card balance

You would add up your total assets to find that you own $705,000 worth of stuff. Then you would add up your debt to discover you owe a total of $497,000. Subtract what you owe from what you own to discover that your net worth is $208,000.

You can input your own numbers to find out your net worth, which is often considered to be a measure of your total wealth.

Why is tracking your net worth so important?

Tracking your net worth is really important for two reasons:

Looking at this number shows you what you actually own and how close you are to becoming financially independent.Tracking this number over time shows whether you are making good progress toward your goals.

Say, for example, you were told that someone owned a $5 million house while another person owned a $150,000 house. You might think that the first person was “richer.” But, if the first person had a $4.9 million mortgage and $1 million in other loans and the second had no debt at all, the second person would be in a better financial position.

The second person’s net worth is higher — and it’s a more accurate estimation of their wealth than just looking at what they own. Getting this kind of full picture of your own finances can be really helpful in showing you how close you are to developing enough wealth to be financially secure.

You can also see if you’re moving in the right direction when you track this number. Many people start out with a negative net worth when they borrow to buy their first car or to earn a degree, for example. But then as they acquire more assets, like a house that goes up in value, their net worth turns positive and keeps growing. If that’s not happening to you, you can make some changes, such as increasing your income so you can save more money, or paying down current debts.

The good news is, tracking your net worth is really easy. Just add up what you own, subtract what you owe, and you’ll know exactly what yours is. You can do this every six months or every year to see your progress over time and ideally, you’ll find yourself getting richer.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More