Lesson 3.3

How to know your (net) worth and why it matters

What does net worth mean?

Your net worth is the difference between what you own in your name and what you owe to other people or institutions. It is a key measure of your financial health and wealth. What you own can include things like property, shares or cash, while what you owe can include home loans, car loans or credit card debt.

When you’re young, it’s totally normal to have a small, or even negative, net worth. As we age, we hope to build up our net worth to ensure we have enough resources to support us when we’re too old or don’t want to work.

Having an idea of your current net worth can help you to track your financial progress over time and help you to get a sense of how far you have to go on your financial journey. 

How to calculate your net worth

First, create a list of all the things you own, your assets.

These can range from cash to property to shares and may even include things like artworks, collectibles and gift cards. 

Download My Net Worth Worksheet (PDF, 0.8MB)

Next, tally up how much you owe to other people, and institutions.

If you own assets with other people, such as a spouse, consider if you want to calculate your joint net worth, or your individual net worth.

So, what are you worth?

Add your assets and your liabilities separately, and then subtract what you owe from your assets – this is your net worth. For example, if you have $650,000 in assets and $550,000 in current debts, your net worth is $100,000.

A positive net worth means you own more than you owe. A negative net worth value means you currently owe more than you own.

Don’t be discouraged if your net worth is not where you hoped it would be. By establishing your baseline, you can watch your progress over time. And knowing where your debts are, can help you formulate a plan for paying them off.

How to increase your net worth

There are two ways to increase your net worth, either to reduce the amounts you owe or increase what you own.

Not all debt is bad debt, particularly if it is used to purchase assets which grow in value over time.

In our next ‘Grow’ module, we will explore ways to boost your net worth through investing and wise use of debt.