Net worth
Net worth is what a person or household owns minus what it owes: the total of its assets, such as cash, investments and a home, less the total of its debts, such as a mortgage, a car loan and a credit card balance. It is a figure on one date, and it can be negative.
What is net worth?
Assets are what is owned at its current value: bank balances, brokerage and retirement accounts, a home. Liabilities are what is owed: the balance on a mortgage, a car loan, a student loan, a credit card. Net worth is the first total minus the second.
It is a different figure from income. Income is a flow over a period, such as a salary or a month of paychecks. Net worth is a level on a date. A high income can come with a low net worth when the debts are large, and the reverse.
A bank or card balance is a figure the institution reports. The value of a home or of a private company's shares is an estimate until it sells, so a net worth that includes one is an estimate too.
How net worth works, with numbers
A household has $12,000 in checking, $30,000 in savings, $180,000 in retirement accounts and a home worth $450,000: $672,000 of assets. It owes $320,000 on the mortgage, $18,000 on a car loan and $4,000 on a credit card: $342,000 of debt. Its net worth is $330,000.
Paying the $4,000 card from checking lowers the assets to $668,000 and the debt to $338,000. The net worth is still $330,000.
- Checking, savings, retirement
- $222,000
- Home
- + $450,000
- Assets
- $672,000
- Mortgage, car loan, card
- − $342,000
- Net worth
- $330,000
Why net worth matters
Paying a debt from cash moves both sides by the same amount, so net worth holds, as the example shows. It moves when income arrives and stays, when money goes to something that isn't counted as an asset, when interest adds to what is owed, and when the value of an asset changes. A shift in the market or in local home prices changes it without a dollar changing hands.
Read across dates, the change splits into the parts that moved: a mortgage paid down, a retirement balance up, cash drawn down.
Net worth in Taiga Finance
Taiga Finance shows net worth on the Accounts page as “Position”, the household total. Under it, “Assets” and “Liabilities” each give a total and a bar split into bands, with rows such as “Real Estate”, “Retirement” and “Mortgage”, each with its amount and its share.
In Reports, Net worth by class opens a page titled “Net worth composition”: “Net worth”, “Assets” and “Liabilities” over a chart that stacks the asset bands above zero and the debt bands below it, with net worth drawn as a line through them. A month uses the last reading on or before that month's end, and the current month uses today's. A home lands in “Real Estate”, its loan in “Mortgage” and a HELOC in “Home Equity”.
Net worth by class, in the help center →Key takeaways: Net worth
- Net worth is total assets minus total debts, on one date.
- Paying a debt from cash lowers both sides equally and leaves net worth where it was.
- It changes with the value of what is owned as well as with saving and spending.
- A net worth that includes a home or private shares is an estimate, because those values are.
Questions about Net worth
What is net worth?
What is owned minus what is owed, on one date. A household with $672,000 of assets and $342,000 of debt has a net worth of $330,000.
How is net worth calculated?
It is the total of the assets at their current value, such as cash, investment and retirement balances and a home, minus the total of the debts at their current balance, such as the mortgage, loans and cards.
How does Taiga Finance track net worth over time?
It records the household's balances as they sync or are entered, sorts them into bands by account type, and draws the bands and the net worth line month by month in the Net worth by class report.
Does paying off debt increase net worth?
Not when it is paid from cash: the cash and the debt fall by the same amount. Paying a $4,000 card from checking leaves a $330,000 net worth at $330,000.