How to calculate your net worth, step by step

The formula

Net worth = assets − liabilities. Assets are what you own that has a money value. Liabilities are what you owe to someone else. If the result is positive you own more than you owe; if it's negative, your debts are bigger than your assets for now.

Step 1: List your assets

• Cash and bank balances: savings and current accounts, cash at home, wallets.
• Investments: mutual funds, stocks, fixed deposits, retirement accounts, at today's value.
• Money owed to you: loans you've given friends or family that you expect back.
• Big possessions (optional): a home or car at a realistic resale value. Many people leave these out and track only liquid net worth, which is easier to keep current.

Step 2: List your liabilities

• Credit card balances: the full amount outstanding, not just the minimum due.
• Loans: home, car, education and personal loans, at the principal still owed.
• Money you've borrowed from friends or family.

Step 3: Subtract

Add up each list and subtract liabilities from assets. Here's a simple example:

• Bank accounts ₹1,80,000 + investments ₹3,25,000 + lent to a friend ₹5,000 = ₹5,10,000 in assets
• Credit cards ₹24,950 + borrowed ₹2,000 = ₹26,950 in liabilities
• Net worth = ₹5,10,000 − ₹26,950 = ₹4,83,050

What to do with the number

A single snapshot matters less than the direction it moves. Work it out again each month, on the same day, and watch the trend. If it's rising, your saving and investing are outpacing your spending and debt. If it's flat or falling, look at the two levers: spend less than you earn, and pay down high-interest debt such as credit card balances first.

Don't compare your number with other people's. Net worth depends heavily on age, income and where you live. The useful comparison is with yourself a month or a year ago.

Common mistakes

• Counting the credit limit instead of the balance you owe.
• Using a home's purchase price rather than what it would sell for today.
• Forgetting small debts and IOUs, which add up.
• Checking too rarely: a yearly calculation hides the habits that move it.

This guide is general information, not financial advice. Your situation may differ, so check the details that apply to you.