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Understanding Net Worth: How to Calculate Your Wealth

If you are looking to understand your financial health, one important metric to know is your net worth. Net worth is a simple calculation that takes into account your assets and liabilities. Simply put, it is the difference between what you own (assets) and what you owe (liabilities). In this article, we will explain how to calculate your net worth and answer some common questions about this topic.

What is Net Worth?

Net worth is the value of an individual's or entity's assets, minus the liabilities they owe. It is a measure of wealth and financial standing. Your net worth can be positive or negative. A positive net worth means you have more assets than liabilities, while a negative net worth means you owe more than you own.

What is Tangible Net Worth?

Tangible net worth is a measure of a person's or business's net worth that takes into account only tangible assets, such as property, investments, and other physical assets, minus liabilities. This excludes intangible assets, such as goodwill or intellectual property, which can be difficult to value and sell.

Tangible net worth is often used as a measure of financial health and stability, particularly in industries such as real estate or manufacturing where physical assets play a major role in the business. It is important to note that tangible net worth is just one of several measures of net worth and financial health, and should be used in combination with other metrics to get a complete picture of an individual's or business's financial situation.

How to Calculate Your Net Worth

Calculating your net worth is a straightforward process. Here are the steps you should take:

  1. Make a list of your assets: This includes any property you own, such as your home or car, as well as any investments or savings accounts you have.

  2. Determine the value of each asset: For example, you can use the current market value of your home or car. For investments, use the current value of the stocks, bonds, or mutual funds.

  3. Make a list of your liabilities: This includes any outstanding debts you owe, such as credit card balances, student loans, or mortgages.

  4. Determine the amount owed on each liability: This should be the current balance owed, not the original loan amount.

  5. Calculate your net worth: Subtract the total amount of your liabilities from the total value of your assets.

Does Your 401k Count as Net Worth?

Yes, your 401k retirement account is considered an asset and should be included when calculating your net worth. The current value of your 401k account is what you should use as the asset value.

For many, their 401k is a critical and the largest part of their net worth.

How to Calculate Your Net Worth to Retire

Calculating your net worth to retire is similar to calculating your regular net worth. The main difference is that you will want to include any expected retirement income, such as Social Security or pension payments.

Here are the steps to follow:

  1. Make a list of all your retirement income sources: This includes any expected income from Social Security, pensions, or annuities.

  2. Determine the total amount of income you can expect to receive annually from these sources.

  3. Calculate your retirement savings: This includes your 401k, IRA, or any other retirement savings accounts you have.

  4. Determine the current value of your retirement savings.

  5. Calculate your net worth to retire: Add the expected annual retirement income to the current value of your retirement savings, then subtract any outstanding debts or liabilities.

How to Calculate My Net Worth: A Step-by-Step Guide

To calculate your net worth, follow these simple steps:

  1. Make a list of all your assets, including property, investments, and savings.

  2. Determine the current value of each asset.

  3. Make a list of all your liabilities, including credit card balances, loans, and mortgages.

  4. Determine the amount owed on each liability.

  5. Subtract the total amount of your liabilities from the total value of your assets to calculate your net worth.

What Net Worth is Considered Rich?

Being rich is a relative term that only you can define. Some people want to be in the top 1% within their geography. Which would vary if you are in Kansas vs Colorado. Others, are good to have enough money to cover the basics or the top 50% of all people. Again, this amount will vary depending on where you live.

The real median household income in the US is around $70,000, according to the latest Census Bureau data. In order to be in the top 20% of income, you’d need to earn nearly double that amount or an average of $130,545 per year (that's a hefty salary).

That’s according to a SmartAsset study of income distributions in the 100 largest U.S. cities. SmartAsset's research supports the notion that your geography dramatically impacts the percentile your salary will land you in. People who live in San Francisco need an income of $250,000 or more per year to land in the top 20%. Meanwhile, you’d need an income of around $70,000 to be a top 20% earner in Detroit (remember that is the household median across the US).

Again, what it means to be rich is subjective. Someone who makes $500,000 a year, for example, could be considered rich if they’re saving and investing in order to accumulate wealth and live in an area with a low cost of living.

What is a Good Net Worth by Age?

Your net worth will naturally increase as you age and accumulate more assets. Here are some general guidelines for a good net worth by age:

  • Age 30: By the age of 30, a good net worth would be around $50,000 to $100,000. This can vary depending on factors such as income, career trajectory, and personal circumstances.

  • Age 40: By the age of 40, a good net worth would be around $200,000 to $400,000. This should include retirement savings, as well as any other assets and investments.

  • Age 50: By the age of 50, a good net worth would be around $500,000 to $1 million or more. This should take into account any major expenses such as children's education or healthcare costs.

  • Age 60: By the age of 60, a good net worth would be around $1.5 million or more, which should provide a comfortable retirement.

It is important to remember that these are just general guidelines, and everyone's financial situation is unique. Factors such as location, lifestyle, and personal goals can all affect what is considered a good net worth.


Knowing your net worth is an important part of understanding your financial health. By calculating your net worth and understanding what factors contribute to it, you can make more informed decisions about your finances and plan for your future. Remember to consider your retirement savings and other assets when calculating your net worth, and don't forget to take into account any outstanding debts or liabilities.

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