Add up everything you own, subtract everything you owe, and find the single number that captures your financial position today.
Net worth is total assets minus total liabilities. Everything you own at a defensible value, minus everything you owe. It is the single number that answers whether your financial position improved this year, and it is the only number that cannot be flattered by a raise.
It is not income, and it is not liquidity. A household with a $380,000 house, a $265,000 mortgage, and $8,000 in checking has a positive net worth and almost no cash. That combination is normal in the US and it explains why a household can be technically solvent and still unable to cover an unexpected $3,000 repair.
Assets: checking and savings, brokerage accounts, retirement accounts, the market value of a home, vehicles at private-party value, and any business interest. Liabilities: mortgage balance, auto loans, student loans, credit card balances, personal loans, and medical debt. Use the payoff balance rather than the original amount, and use a realistic home value rather than the highest number a neighbor mentioned.
The debt ratio is the calculator's second output and the more useful one over time. Under 30% is a light balance sheet. Between 30% and 60% is ordinary for a homeowner in the middle of a mortgage. Above 60% means liabilities dominate, and a decline in asset prices turns a manageable situation into a distressed one.
Assets: $8,000 checking, $145,000 retirement, $380,000 home, $18,000 car. Total $551,000. Liabilities: $265,000 mortgage, $4,500 credit card, $12,000 student loan. Total $281,500. Net worth is $269,500 and the debt ratio is 51.1%, which lands in the moderate band.
Now subtract the house from both sides, since the home is where you live and selling it does not produce cash you can spend without buying somewhere else to live. Non-housing assets are $171,000 against $281,500 of debt, which is minus $110,500. The household is solvent only because of the house. That is not a crisis at this stage of a mortgage, and it does mean the next dollar of savings should go to liquid assets rather than to extra principal.
| Measure | Default example | What it tells you |
|---|---|---|
| Net worth | $269,500 | Solvency, long-run progress |
| Liquid net worth | −$110,500 | Ability to absorb a shock |
| Debt ratio | 51.1% | Leverage, fragility to price drops |
A single number hides all of this. Track all three, and track them quarterly rather than monthly, because monthly moves are mostly noise from market prices you did not control.
Three forces, in order of reliability: saving, investment returns, and debt repayment. Saving is the one you decide. Returns are the one you wait for. Debt repayment is a guaranteed return equal to the interest rate, which is why paying off a 22% card is worth more than any investment available with certainty.
The arithmetic of accumulation is not linear, and this is the part that surprises people. Investing $500 a month at 7% reaches $100,000 in 11.1 years. The second $100,000 arrives 6.2 years later, at year 17.2. The fourth takes 3.3 years and the fifth takes 2.7. The last $500,000, from the half-million mark to the million, takes 8.8.
| Milestone | Years at $500/mo and 7% | Years to add this $100,000 |
|---|---|---|
| $100,000 | 11.1 | 11.1 |
| $200,000 | 17.2 | 6.2 |
| $300,000 | 21.6 | 4.3 |
| $400,000 | 24.9 | 3.3 |
| $500,000 | 27.6 | 2.7 |
| $1,000,000 | 36.4 | 1.4 (from $900,000) |
The first $100,000 takes longer than any $100,000 after it, which is why the early years feel like nothing is happening. That feeling is accurate and it is temporary. People who quit at year five quit in the slowest part of the curve.
Do not count the value of a pension you have not started drawing unless you can compute a present value, and do not count expected inheritances or future Social Security. Both are real, and both are contingent. A net worth that includes contingent assets is a projection wearing a balance sheet's clothes.
Do count the full mortgage balance alongside the full home value, rather than netting them into equity. The two numbers move independently, and the debt ratio only works if both are visible. Netting them is how households end up surprised by how little equity they actually have after closing costs.
For vehicles, use private-party value and expect it to fall. A car is a depreciating asset with a loan attached, which is the worst combination on a balance sheet: the asset loses value faster than the debt falls. The auto loan calculator shows how much of each payment goes to interest during the period when the car is worth less than the loan.
The Federal Reserve's Survey of Consumer Finances is the standard reference, published every three years, and it shows median net worth rising steeply through the fifties and peaking in the sixty-to-seventy-four age band before declining. The shape matters more than the exact figures, because the shape tells you that a negative or small net worth at 30 is normal and the same number at 55 is not.
Age-based targets used by brokers, such as a multiple of salary by a given age, are marketing devices. They assume a career trajectory and a household structure that many people do not have, and they say nothing about what you actually need. A better question is what your own spending requires, which is what the FIRE calculator computes from expenses rather than from income.
Net worth is a stock; everything else on this site is a flow. The savings goal calculator turns a monthly deposit into a date, and the debt payoff calculator attacks the liability side of the same statement. Once the number is positive and growing, the retirement withdrawal calculator asks the next question, which is how much of it can be spent each year without running out.
Yes, at a realistic market value, and separately from the mortgage rather than netted into equity. Excluding it produces a number that understates a homeowner's position for the purpose of tracking solvency. That said, home equity is not spendable, so track liquid net worth alongside it and make decisions about emergencies using the liquid figure.
Under 30% is comfortable, 30% to 60% is ordinary for a homeowner with a mortgage, and above 60% is a warning. The ratio matters because it measures how much asset value can fall before net worth disappears. At 51%, a 49% decline in asset values wipes out the balance sheet, which sounds extreme until you remember that 2008 produced declines in that range in some markets.
Quarterly. Monthly numbers move with markets and produce anxiety without information. Annual is too infrequent to catch a drift in debt. The quarterly cadence also matches how most people review their accounts, and it means you see four data points a year rather than one.
Because asset prices moved more than your savings. A 5% decline in a $500,000 portfolio is $25,000, which overwhelms $2,000 of monthly saving. This is normal and it reverses. It is also the reason to judge the plan on contributions during falling markets and on the balance during rising ones.
The loan is a liability and the remaining balance is an asset, so a 401(k) loan is roughly neutral at the moment you take it. What changes is the interest, which you pay to yourself, and the lost growth on the borrowed portion while it is out of the market. The net worth effect is small and the behavioral effect is larger.
Include them at a value you could actually realize within a month, and be conservative. A collection appraised at $40,000 that would net $25,000 at auction is worth $25,000 on a balance sheet. Volatile assets belong in the total, and decisions about emergencies should never depend on them.
Same compounding math, different starting question.