What Is Net Worth and Why Does It Matter?
Net worth is the single most comprehensive measure of your financial health. It's calculated as:
Net Worth = Total Assets − Total Liabilities
A positive net worth means you own more than you owe. A negative net worth is common early in life (especially with student loans or a new mortgage) and simply means you're still building. The number itself matters less than the trajectory -- is it growing year over year?
Tracking net worth monthly or quarterly is the best way to measure real financial progress. Income goes up and down, but a steadily rising net worth tells you that your wealth is actually accumulating.
Assets vs Liabilities: What to Include
Assets are things you own that have monetary value: bank accounts, investment accounts, retirement accounts, real estate (at market value), vehicles, and business interests. Include the current market value -- not what you paid.
Liabilities are amounts you owe: mortgage balance (not your home's value -- that's an asset), auto loans, student loans, credit card balances, HELOCs, and personal loans. Use current outstanding balances, not original loan amounts.
Common mistake: People often forget to include retirement accounts (401k, IRA) as assets, and forget to subtract loan balances from vehicle or home values. Your home is an asset worth its market value; your mortgage is a separate liability. Both go in the calculator.
The Solvency Ratio
The solvency ratio (Total Assets / Total Liabilities) tells you how many times over your assets could cover your debts. A ratio above 1.0 means you're solvent. A ratio of 2.0 means your assets are worth twice your debts. Financial planners generally target a ratio of 2.0 or higher for stability, and 5.0+ for strong financial health approaching or in retirement.
Average & Median Net Worth by Age (2026)
The Federal Reserve's Survey of Consumer Finances provides the most comprehensive data on American household wealth. Median net worth is a better comparison point than average -- a small number of ultra-wealthy households pull the average dramatically higher.
| Age Group | Median Net Worth | Average Net Worth | Key Milestone |
|---|
| Under 35 | $39,000 | $183,000 | Build emergency fund; start investing |
| 35 to 44 | $135,000 | $549,000 | Home equity building; retirement on track |
| 45 to 54 | $247,000 | $975,000 | Peak earnings; max retirement contributions |
| 55 to 64 | $365,000 | $1,566,000 | Pre-retirement; debt elimination |
| 65 to 74 | $410,000 | $1,794,000 | Transition to distribution phase |
| 75 and older | $335,000 | $1,624,000 | Managing withdrawals and estate |
Source: Federal Reserve Survey of Consumer Finances (2022, most recent available). Figures reflect 2026 estimates adjusted for inflation.
Rule of thumb: By age 30, aim for net worth equal to your annual income. By 40, 3x your income. By 50, 6x. By 60, 8x. By retirement, 10x to 25x your annual spending (the range depends on your expected Social Security income and spending level).
Frequently Asked Questions
Should I include my home in my net worth?
Yes -- your home's current market value goes in assets, and your remaining mortgage balance goes in liabilities. The difference (your equity) is what contributes to net worth. For example: home worth $350,000 with a $220,000 mortgage = $130,000 of equity boosting your net worth. Use an estimate from Zillow, Redfin, or a recent appraisal for the market value. Don't use what you paid for it.
Do I include my car as an asset?
Yes, at its current market value -- not what you paid or what you owe. Use Kelley Blue Book or CarMax to get a current estimate. If you have an auto loan, include the remaining loan balance as a liability. For most cars 3+ years old, you'll likely owe less than the car is worth (positive equity). For newer financed cars, you may temporarily be "underwater" (owe more than the car is worth), which shows as negative equity in your net worth.
Should I include retirement accounts in my net worth?
Yes -- 401(k), IRA, Roth IRA, HSA, and pension values are real assets that belong in your net worth calculation. Some people exclude them since the money is illiquid or tax-deferred, but financial planners universally include them. For Traditional 401(k)/IRA, you might discount the balance by your expected tax rate since withdrawals are taxed -- but for simplicity, most people use the full balance. What matters most is consistent methodology so you can track change over time.
What is a good net worth for my age?
The median net worth benchmarks above give useful context, but "good" is relative to your own goals, income, and cost of living. A more meaningful benchmark: aim for your net worth to grow by at least the equivalent of one year's savings rate annually. If you're saving 15% of a $80,000 income ($12,000/year), your net worth should grow by at least $12,000 a year -- more if your investments are growing too. Comparing to peers is less useful than comparing to your own trajectory.
My net worth is negative -- should I be worried?
Not necessarily. Negative net worth is extremely common for people under 35, especially with student loans. The median net worth for Americans under 35 is around $39,000 -- but many in this group have significant student debt pulling their number down or negative. What matters is: (1) Is it moving in the right direction? (2) Do you have a plan to pay down debt and build assets? A negative net worth with rising income and a clear payoff plan is far better than a slightly positive net worth with no savings habits.
How often should I calculate my net worth?
Monthly is ideal for people actively paying off debt or building wealth -- you'll see the progress clearly. Quarterly works well if your finances are stable. At minimum, calculate it once a year on the same date (January 1st is popular) so you have a clean annual comparison. The value isn't in any single number -- it's in watching the trend over months and years. Even slow, steady growth of $500/month adds up to $6,000 a year and $60,000 over a decade.