Household

Net Worth

Add up what you own and what you owe. Net worth is the single number that shows whether your finances are moving forward year to year.

Tracking net worth

Net worth is everything you own minus everything you owe. The number on any one day matters less than its direction. Update it every few months and watch the trend.

Use realistic values. A home is worth what it would sell for after agent fees, and a car is worth its private-sale price, not what you paid for it. Retirement accounts count at full value here, but you will owe income tax on traditional 401(k) and IRA money when you withdraw it.

Reading the ratio

The debt-to-asset ratio shows how much of what you own is financed. Early in a mortgage it may be above 70%. Over time it should drift down as you pay off loans and your savings grow.

Common questions

What is a good net worth for my age?

There is no single target. A well-known rule of thumb from the book The Millionaire Next Door is your age times your annual pre-tax income, divided by ten. The trend over time matters more than any one number.

Should I include my home in net worth?

Yes, at a realistic sale price minus selling costs, with the mortgage counted as a debt. Some people also track net worth without the home to see their liquid position.

What is a healthy debt-to-asset ratio?

Lower is stronger. New homeowners often start above 70%. Over time it should fall as loans are paid down and savings grow.