People often use income as a shorthand for financial health, but income and net worth measure completely different things. It's entirely possible to earn a large salary and have a small (or negative) net worth, and just as possible to earn modestly while steadily building real wealth. Net worth is the number that actually tells you where you stand.
The formula is simple, the tracking isn't
Net worth is just assets minus liabilities. Add up everything you own that has monetary value -- cash, savings, investments, retirement accounts, property, vehicles -- then subtract everything you owe -- credit card balances, loans, mortgages, any other debt. What's left is your net worth. The formula takes ten seconds to state; actually gathering accurate numbers for every account you hold is the part most people never get around to doing.
Income and net worth can move in opposite directions
Someone earning a high salary but carrying large debt payments, a big mortgage, and no meaningful savings can have a lower net worth than someone earning far less but living below their means and investing consistently. Income is a flow -- money moving through your life each month. Net worth is a stock -- what's actually left over and accumulated. A high flow with nothing retained doesn't build the stock at all.
Why a single snapshot is less useful than a trend
Calculating your net worth once tells you where you are today, but it doesn't tell you much on its own -- a negative net worth right after buying a house with a mortgage looks alarming in isolation but is completely normal. What actually matters is the direction it moves over time. Recalculating every few months (or after any major financial event -- a new job, paying off a loan, a market swing) turns a single number into a trend line, and the trend is what tells you whether your financial decisions are working.
Assets aren't all equally liquid
When you total up assets, it's worth keeping in mind that not all of them can be turned into cash equally fast. Savings and investments are liquid. A home or a car is an asset on paper, but converting it into spendable money takes time and often comes with costs. A net worth number that's mostly home equity behaves very differently in an emergency than one that's mostly cash and investments, even if the total is identical.
Debt isn't automatically bad
Subtracting liabilities doesn't mean all debt is a problem to eliminate on sight. A mortgage against a house that's appreciating, or a loan that funded something producing income, is a different kind of liability than high-interest credit card debt with nothing to show for it. Net worth treats all debt the same in the subtraction, but you shouldn't -- the interest rate and what the debt was used for matter just as much as the balance.
Calculate yours
The Net Worth Calculator adds up your assets and liabilities and gives you the number directly, so you can start tracking it as a trend instead of guessing where you stand.