What Is Net Worth?
Net worth is the difference between what you own and what you owe. It's the single most useful number for understanding where you stand financially.
The Formula
Net worth = Assets − Liabilities
That's it. Add up everything you own, subtract everything you owe, and the result is your net worth.
Assets
Assets are things that hold value:
- Cash and savings accounts
- Investment accounts (shares, ETFs, super)
- Property
- Vehicles
Liabilities
Liabilities are debts you owe:
- Mortgage
- Car loans
- Credit card balances
- Personal loans, HECS debt
A Practical Example
Say you're 32 years old with the following:
| What you own | Value |
|---|---|
| Savings account | $12,000 |
| Share portfolio | $28,000 |
| Super | $45,000 |
| Car | $15,000 |
| Total assets | $100,000 |
| What you owe | Value |
|---|---|
| Car loan | $8,000 |
| Credit card | $2,000 |
| HECS debt | $18,000 |
| Total liabilities | $28,000 |
Net worth = $100,000 − $28,000 = $72,000
That's a good position at 32. But the number itself matters less than the direction. Is it growing month on month?
Why It Matters
Your income tells you how much money flows in each month. Your net worth tells you how much has actually stuck.
Two people can earn the same salary and end up with very different net worths depending on how much they save and spend.
Tracking net worth over time is the best way to measure real financial progress — it gives you a far-reaching view that budgets alone can't.