What is net worth?
Net worth is assets minus liabilities. Or, you can think of net worth as everything you own less all that you owe.
How do you calculate net worth?
Calculating your net worth requires you to take an 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 – LIABILITIES = NET WORTH
And by the way, your income is not included in a net worth calculation. A person can bring home a big paycheck but have a low net worth if they spend most of their money. On the other hand, even people with modest incomes can accumulate significant wealth and a high net worth if they buy appreciating assets and are prudent savers.
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.
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 items such as cars, property and investments 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.
“Some fixed assets can count toward your net worth calculation, too.”
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.
How your net worth compares
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%|
Net worth of U.S. families by age
|Age tier||2016||2019||Change 2016-2019|
|Less than 35||$11,700||$13,900||19%|
|75 or more||$281,600||$254,800||-10%|
Net worth of U.S. families by race or ethnicity
|Race or ethnicity||2016||2019||Change 2016-2019|
|Black or African American non-Hispanic||$18,200||$24,100||33%|
|Hispanic or Latino||$21,900||$36,200||65%|
|Other or multiple race||$68,800||$74,500||8%|
Net worth of U.S. families by education
|No high school diploma||$24,300||$20,500||-16%|
|High school diploma||$71,300||$74,000||4%|