Sometimes you hear chatter on the Internet about people with an extremely high net worth (often to complain about them). But net worth isn’t something only the ultra-wealthy should be aware of. Every investor show know how net worth is calculated, what it means, and why it’s important.

To figure out your net worth, there’s a pretty simple calculation: 

Net worth = the value of what you own minus what you owe

In other words, all your assets, minus all your liabilities.

Now that we have a couple of simple net worth definitions, you’re probably already mentally trying to figure out what your number is. It’s time to unpack the term “net worth” and look into why it’s meaningful to you. 


What is Net Worth? 

Net worth is a big-picture number, giving you a quick snapshot of your finances. 

Rather than only looking at one facet of your finances, such as debt total or the value of your rental properties, net worth gives you an overall idea of how you’re doing financially. 

Remember, use this simple net worth formula: Net Worth = Assets – Liabilities 

So how do you calculate your net worth? By totaling up every one of your assets, then subtracting anything you’re still paying on or don’t own outright. It’ll take at least a few minutes of inspecting all your accounts and making good, solid estimates on assets like real estate holdings. 

When doing asset calculations, think of everything you own that has monetary value. Checking, savings, brokerage, and retirement accounts all fit into this category. Your emergency fund and cars you could sell would count towards your assets. Plus, list the estimated value of all properties you own and any other investments you may hold. 

Perhaps you’ve got some valuable personal items. Maybe it’s a rare collection of antiques, or some significant jewelry items. If it’s a large enough number to include in your calculations, go ahead and do that. 

Basically, everything you own that you can assign a dollar value to fits under the umbrella of assets. That’s the first figure you need to know to calculate your net worth. 

The second figure in the calculation is your liabilities – anything you still carry a balance on. It’s pretty straightforward: just tally up your debts. 

If it carries a balance and you’re responsible for paying it, that’s a liability. 

One of the big-ticket liabilities many people have might be their home mortgage or a mortgage on any other properties. Vehicle loans tend to be among your higher-balance debts as well. 

Student loans and credit-card balances? Yep, put them in the Liabilities column. Just don’t include credit cards if you pay the balance in full each month. 


Sample Net Worth Calculation

To illustrate how to calculate your net worth, here’s a quick example. Say Jill has the following in assets: $250,000 in real estate, $1,500 in checking, $13,500 in savings, $140,000 in retirement accounts, and a $10,000 vehicle. The total value of their assets is $515,000. 

Now for Jill’s liabilities: $200,000 remaining on mortgage debt, $4,000 in consumer debt (credit cards, etc.), $11,000 in student loans, and a $5,000 vehicle they’re still paying on. Total liabilities: $220,000. 

Using our easy net worth formula, just subtract $220,000 from $515,000. Jill’s total net worth would be $295,000.

Of course, your situation is likely more complicated than this hypothetical one. But regardless, it’s still just basic math! 


Investable Net Worth

Another useful term in the discussion of net worth is your investable net worth. Since it’s rather unlikely you’ll ever decide to liquidate literally every asset, it might be more prudent to consider investable net worth. 

Investable net worth is pretty straightforward: calculate it the same way as your total net worth, but don’t include personal properties in the assets total. 

For an accurate number of your investable net worth, your assets will only include savings and investments, not vehicles, personal belongings, or your primary residence. 

If you’ve got investment properties as part of your retirement strategy, go ahead and count those in your investable net worth calculation. But don’t include your primary residence, because you won’t be selling that except in extreme emergency cases. Leave out vehicles as well, unless they’re used to run your business (e.g. you have a trucking business).

Other tangible assets to exclude from your investable net worth include jewelry, art, or collectibles that might not sell instantly. There may not be a demand for those items in the event you need to liquidate them. 


Why Investable Net Worth is Useful

Why bother focusing on investable net worth, rather than the standard net worth definition? 

To begin with, your home, vehicles, and personal belongings represent expenses. The more you spend on them, the less you can put toward true investments that generate passive income and compound in value over time. Including them in your net worth calculations is deceptive, and creates the illusion of greater true wealth than you actually have.

Investable net worth gives you a better understanding of your financial health.

Calculating your investable net worth also helps you, well, invest. Maybe you’re looking at redistributing some of your funds – if your emergency fund is overly padded, you could re-invest that excess money to earn greater returns. 

Perhaps you’re applying for financing on a new business venture or a property purchase. Banks and lenders will want an accurate picture of your investable net worth in this case. 

If you’ve learned about the BRRRR method of purchasing real estate, you know you can get creative with your financing. This is a different way to leverage net worth, but it can be an exciting way to create multiple rental income streams.

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Liquid Net Worth

Another net worth definition to familiarize yourself with is “liquid net worth”. This refers to the actual money you would get upon liquidation of all your assets.  

Liquid net worth is lower than your total net worth, because for many of your assets, there’s a cost involved in selling them. For example, selling some of your mutual fund shares may incur expenses. Selling real estate holdings is definitely not free (and takes some time in most cases). 

The cost associated with liquidating everything you own – selling all properties, cashing out all savings and retirement accounts, selling cars – reduces your practical net worth somewhat. 

For basic checking or savings accounts, there’s no penalty or fee for taking those funds out. However, CDs often have early-withdrawal penalties, so consider that when calculating your liquid net worth. 


Why You Should Track Your Net Worth Automatically

Net worth isn’t everything. But it’s a primary indicator of your financial health and wealth. Here are a few ways knowing net worth can be beneficial.


Knowledge Is Power

Knowledge is the first step to change. Before you can improve your finances, you have to know your current money situation. 

If you haven’t tried to calculate your net worth, it can be tough to figure out the best plan. Hiding from your debts won’t help you pay them down, nor will hiding from your total net worth. 

A low or negative net worth is discouraging, but don’t hide from it. Learn how to calculate net worth so you can take steps to improve it. 

Plus, you need to keep an eye on your asset allocation, and periodically rebalance your assets to reflect your goals. For example, you may want to hold 5% of your investable net worth in cash, 45% in rental properties, 45% in stocks, and 5% in bonds. But if stocks have a great year, you might find that 55% of your net worth is now held in stocks, and sell off some proceeds to invest in real estate and bonds.


Net Worth Tracking Provides Motivation

Tracking your net worth, where you can easily click a button and see exactly how you’re doing, helps you stay motivated. It keeps your wealth tangible, and your long-term goals in focus.

Gather all your account on the same page, so with a quick glance it’s clear whether your finances are moving in the right direction. Websites like make this extremely easy to do (more on that shortly).

As a property investor, net worth tracking enables you to watch how your properties are impacting your net worth. Keep revisiting those figures often to determine which properties are bringing in the most income and helping grow your net worth. 

Your best buy-and-hold rental properties should do great things for your net worth. All the more reason to keep an eye on your net worth with automatic net worth calculations on a regular basis. 


Net Worth Tracking Provides Accountability

Another great argument for automatically tracking your net worth? It keeps you accountable to yourself. 

We all need something to get us back on track when we mess up. Automatic net worth calculations are like an accountability partner. Much like a gym buddy who reminds you to work out, net worth updates remind you to stick with your financial plans. 

Watching your net worth gradually shift from negative to zero to positive is encouraging. It may help reinforce your commitment to saving a certain percentage of your income or find the motivation to increase your savings rate by even more.

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How to Track Your Net Worth Automatically

Keeping tabs on your net worth has never been easier. Thanks to budgeting and financial tools such as or Personal Capital, anyone can look automatically at their finances from anywhere. 

Mint helps you stay on top of your money, in all its many forms and investments. It enables you to keep all of your account information in one dashboard. Track of debts and when payments are due, create a detailed budget, and see the big picture of your finances. Getting organized is a great step in monitoring and increasing your net worth. 

There are plenty of financial platforms that enable you to monitor your income, savings, budget, liabilities, and net worth on a virtual basis. Automate as much as you can about your finances, making it easier on yourself. 


Net Worth Required to Become an Accredited Investor

An accredited investor is a person or business entity allowed to deal in securities that may not be registered with any financial authorities. They receive special status under financial regulation laws. 

Where does this fit with the net worth conversation? To qualify as an accredited investor, you need a net worth of $1 million or higher, not including your primary residence, or you need an income of $300,000 or more for married couples ($200,00 for individuals). As the SEC sees it, that higher net worth means you don’t need the same level of protection as ordinary investors, so you’re allowed to invest in less regulated investments.

Becoming an accredited investor can open up opportunities to make more money, since you have a higher risk tolerance. Accredited investors can take advantage of investments like private equity funds, venture capital, and hedge funds. 

Because of this, increasing your net worth can boost your income-earning potential by opening far more investing opportunities. 


Other Considerations for New Landlords and Real Estate Investors

It’s likely that if you’re in the business of investing in real estate, you proactively manage your finances. Maybe your real estate investments are a means of generating passive income to help you retire early. Even if early retirement isn’t your goal, you still want to maximize your savings rate and passive income to build wealth and your net worth as quickly as possible.

Once you understand how to calculate net worth, you’ll always have a tangible measure of your financial health. It’s crucial to automate your net worth tracking, and then use those periodic updates to help you plan your next financial moves. 

Net worth is an illuminating tool for you as you build your investment portfolio and real estate holdings. It informs all of your financial decisions as you scale your wealth and approach financial independence.♦


When was the last time you calculated your net worth? What tools do you use to track it? Share your thoughts and tips below!



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