How to calculate your net worth

The formula in one line

Your net worth is everything you own minus everything you owe. Add up your assets, add up your debts, then subtract the debts from the assets. The result can be positive or negative. It is not a grade on how you are doing as a person. It is a snapshot of your finances on one day, and it is most useful when you compare it with your own past snapshots.

List what you own

Start with cash: your chequing and savings accounts. Then add registered accounts like a TFSA, RRSP or FHSA, and any other investment or brokerage accounts, at today’s value. If you own a home, use a realistic value, not the highest price you have heard. A car counts at what you could sell it for today, not what you paid. Most people leave out everyday things like furniture and clothes.

List what you owe

Now list every debt at its current balance. That includes credit cards, lines of credit, student loans, car loans and your mortgage. Do not forget smaller items, like a buy now, pay later plan, a phone you are paying off, or money you owe a family member. Use the full balance you owe today, not the monthly payment. Your statements or online banking will show the exact numbers.

A worked example

Say Priya has $3,000 in chequing and savings, $8,000 in a TFSA and a car she could sell for $12,000. Her assets add up to $23,000. She owes $15,000 in student loans, $1,500 on a credit card and $9,000 on her car loan, so her debts total $25,500. Her net worth is $23,000 minus $25,500, which is negative $2,500. That is very common early in a career, especially with student loans.

Track it over time

One number on its own tells you little. The trend is what matters. Pick a regular day, like the first of each month or each quarter, and use the same method every time. Paying down a debt raises your net worth just as much as saving the same amount. Investment values will move up and down with the markets, so look at the direction over a year rather than reacting to one month.

Common mistakes to avoid

A few slips can throw the number off. Counting money twice is a common one: if you moved $500 from chequing to savings and the transfer has not landed yet, it can look like it is in both places. Overvaluing your home or car makes you feel richer than you are. Forgetting small debts does the opposite. And try not to compare your number with friends, since everyone starts from a different place.

Questions

Is a negative net worth bad?

Not on its own. Many people have a negative net worth early on because of student loans. What matters is whether the number is moving up over time.

Should I include my house in my net worth?

Yes, at a realistic value, and include the mortgage as a debt. Some people also track a second number without the home to see their savings more clearly.

How often should I calculate my net worth?

Monthly or quarterly works for most people. Use the same day and the same method each time, so the numbers are easy to compare.