Net worth: a single number for your overall financial position
Net worth combines everything you own and everything you owe into one summary figure — useful precisely because it captures your overall financial picture in a way that income alone doesn't. A high earner with significant debt can have a lower net worth than a modest earner who has consistently saved and avoided debt.
Net worth = Total assets − Total liabilities
A snapshot, tracked over time
A single net worth calculation is a snapshot, but its real value comes from tracking it periodically — quarterly or annually — to see the trend. A negative or low net worth early on (common with student loans or a recent mortgage) isn't necessarily a problem if the trend is moving in a healthy direction as debt gets paid down and savings accumulate.
Being honest about asset values
Use realistic current market values rather than purchase prices, especially for property and vehicles, which can appreciate or depreciate significantly over time. Overestimating asset values gives a misleadingly optimistic picture that doesn't reflect what you could actually realize if you needed to.