Many of us wonder what we are worth. We are not referring to what we’re worth as people, which is an entirely different concept. We are talking about what we are worth in monetary terms.

In most cases, this is a fairly simple exercise. Net worth is determined by subtracting your liabilities from your assets at a specific moment in time. If you have more assets than liabilities, you have a positive net worth. If your liabilities overwhelm your assets, your net worth is negative.

The goal is to work towards a positive net worth, which indicates that you can pay off all your debts if you need to, or you’re already debt-free. In this way, net worth can be one measure of your financial health and well-being.

• What Does Net Worth Mean?
• How Does Net Worth Work?
• How can you Determine Your Net Worth?
• How do you Calculate Your Net Worth?
• How to Understand Net Worth in Accounting
• Is Net Worth What you make a Year?
• What Net Worth is Wealthy?
• How can you Improve your Net Worth?
• What are the Types of Net Worth?
• What is Google’s Net Worth?
• What is Apple Net Worth?

What Does Net Worth Mean?

Simply put, your net worth is really everything you own of significance (your assets) minus what you owe in debts (your liabilities). Assets include cash and investments, your home and other real estate, cars, or anything else of value you own. Liabilities are what you owe on those assets — including car loans, your mortgage, and student loan debt.

Read Also: Best Savings Account Rates

Net worth is a measure of your financial health because it basically says what you would have leftover if you sold all of your assets to pay all of your debts. Every financial move you make should be aimed at increasing your net worth. This means either increasing assets or decreasing liabilities.

How Does Net Worth Work?

Theoretically, your net worth is the value in cash you would have if you were to sell everything you own and paid off all of your debts. In some cases, this number is actually negative, which indicates that you carry more in liabilities than in assets.

While this is not an ideal situation, it is very common for people just out of college or starting their careers. In that case, your net worth is also a measure of how much debt you would still owe if you emptied your bank accounts and sold everything you own to put toward your debt.

Though neither is a realistic scenario, what your net worth measures is more important than the (generally unrealistic) assumptions that are made to get to that number.

In fact, when it comes to your financial health, there is no ubiquitous magic net worth number you should be striving for. But, you should use your net worth to track your progress from year to year and to hopefully see it improve and grow over time.

How can you Determine Your Net Worth?

Determining your net worth is fairly straightforward. You list and add up all your assets and all your liabilities. Then, you subtract your liabilities from your assets. Since determining your net worth is similar to taking a financial snapshot, you don’t consider your annual income, but rather how much money you have “in the bank” right now. If you want your net worth to be higher, calculate it immediately after you deposit your paycheck.

Below we’re going to show you how you can calculate your net worth by hand. Alternatively, you could use Personal Capital. When you sync up all your accounts, they will automatically calculate your net worth.

Assets

Your assets can be defined as everything you own that has monetary value. They may be liquid like a checking account or non-liquid like your home. If an asset is liquid, it simply means you don’t have to sell it first to realize its monetary value. A few general examples of assets are:

• The market value of your home.
• The market value of your vehicles.
• The money in your investment accounts (including your retirement accounts and life insurance contracts).
• The amount you have in your checking and savings accounts, including CDs and money market accounts.
• Notable items of value you own, such as artwork, furniture, fine jewelry, or collectibles.

Since items like artwork and jewelry can be highly subjective, only include them as assets if you have had them professionally appraised or have a good sense of what someone would pay for them in today’s market.

Liabilities

Liabilities, unlike assets, represent a drain on your resources. These are obligations you have to pay. Your total liabilities aren’t determined by monthly payments owed, but rather by the entire debt you owe. Examples of liabilities include:

• Mortgages
• Car loans
• Credit cards
• Student loans
• Outstanding medical bills
• Back taxes
• Liens and judgments against you

Many people find that they have a negative net worth, thanks mainly to their mortgage debt and car loans. Credit card debt and student loans also have a big impact on your overall net worth. Case in point, the student loans my husband and I have are a big reason why our net worth is negative right now. If you find that your net worth is negative due to your student loans, you might want to think about refinancing with a company like SoFi.

How do you Calculate Your Net Worth?

Once you’ve listed all your assets and liabilities, you can calculate your net worth by subtracting your liabilities from your assets. Here is an example:

Assets:

• Home market value: $180,000
• Vehicle 1 market value: $2,000
• Vehicle 2 market value: $15,000
• IRA: $7,000
• 401k: $11,000
• Other investment accounts: $5,000
• Emergency fund: $4,500
• Short-term savings: $1,000
• Checking: $2,000
• Other bank accounts: $2,000

Total Assets: $229,500

Liabilities:

• Mortgage: $184,000
• Vehicle 2 loan: $10,000
• Total credit card balances: $1,000
• Student loans: $60,000

Total Liabilities: $255,000
Net Worth = $229,500 – $255,000 = -25,500

The net worth here is negative; this person owes $25,500 more than he or she is “worth” in monetary terms.

Here are some examples

To illustrate the process, let’s look at two examples.

Example 1: Gina

Gina is 35 years old. She owns a home worth $250,000, and still owes $150,000 on the mortgage. Her six-year-old car is now only worth about $7,000, but it’s all paid off. She has $1,000 in credit card balances, $25,000 in her 401(k), about $5,000 in her savings account, and $20,000 remaining on her student loans.

Assets

• Home: $250,000
• Car: $7,000
• 401(k): $25,000
• Savings: $5,000

Total assets: $287,000

Debts

• Credit cards: $1,000
• Student loans: $20,000
• Mortgage: $150,000

Total debts: $171,000

GINA’S NET WORTH: $287,000 – $171,000 = $116,000

Example 2: Emma

Emma, meanwhile, is 25 years old and rents an apartment. She has a newer car worth $20,000, but still owes $15,000 on it. Relatively new in her job, she only has $2,000 in her 401(k), and $1,000 in savings; she’s paying down $50,000 in student loans. And she’s racked up $5,000 in credit card debt as well.

Assets

• Car: $20,000
• 401(k): $2,000
• Savings: $1,000

Total assets: $23,000

Debts

• Credit cards: $5,000
• Auto loan: $15,000
• Student loans: $50,000

Total debts: $70,000

EMMA’S NET WORTH: $23,000 – $70,000 = (-$47,000)

How to Understand Net Worth in Accounting

In accounting, net worth is defined as assets minus liabilities. Essentially, it is a measure of what an entity is worth. For an individual, it represents the properties owned, less any debt the person has. For a company, net worth is the value of the company. It is an important section of a company’s balance sheet and is sometimes called “owner’s equity” or “shareholder’s equity.”

Understanding Assets

To arrive at a company’s net worth, one must first calculate the current value of the company’s assets. Assets typically include cash, cash equivalents, property, inventory, machinery and buildings. For a bank, assets are loans it has made to other people.

For a manufacturing company, the bulk of its assets might lie in property, materials, plants and equipment. For individuals, assets include cash, savings accounts, property like homes and cars, investment accounts and other valuable properties, such as jewelry and antiques.

Debt and Other Liabilities

The term “liabilities” refers to debt outstanding. It is basically money owed to someone else. It can be bank debt, bonds or promissory notes. It can also be more immediate debts, such as outstanding payments that the company owes to vendors or a line of credit at a bank.

For a bank, the liabilities are the amounts the bank owes its depositors, meaning the people who have money in accounts at that bank. For individuals, credit card debt, car loans and mortgages make up the bulk of liabilities.

Value from Equity

The term “equity” means ownership. The amount of assets after all liabilities have been subtracted gives you a measure of the company’s ownership or value. Net worth and equity basically mean the same thing, the value of the company.

Sometimes net worth is called shareholder’s equity, if the company is owned by shareholders. Shareholders are sometimes called stockholders and they are the owners of the company’s equity. Net worth is very important to them.

For individuals, equity in a house is what you own, free and clear of the mortgage holder. For a homeowner, a significant part of net worth comes from the value of the house, minus the amount outstanding on any mortgages.

Increasing Net Worth

A company can increase its net worth by paying down liabilities or increasing assets. If a company has positive earnings on its income statement at the end of the year, this will increase its net worth in the form of retained earnings. On the other hand, negative earnings (losses) will decrease net worth. Paying out dividends can also decrease a company’s net worth.

Is Net Worth What you make a Year?

Your net worth isn’t about your income—your income doesn’t even factor into your net worth. Instead net worth includes savings, investments, and debts.

Think about it this way: If you make $30,000 per year, but you have an investment portfolio worth $3.5 million, you’re going to be more concerned about your total net worth because the $30,000 salary you make is a very small part of your financial situation.

Your net worth is an easy way to get a sense of your overall financial health. By sitting down and adding up all that you own (bank accounts, car, house, investments, etc) and subtracting everything you owe (mortgage, car loan, student loans, credit card debt), you can see where you stand.

That’s not to say that your net worth is ultimate arbiter of your financial success or failure. It’s sort of liking tracking your weight as part of an overall fitness plan: It’s a helpful indicator, but it doesn’t give you the whole picture. Your weight, after all, doesn’t take into account your muscle mass, or how much you can run. It’s just a number.

You might have a negative net worth because you got an expensive professional degree that will significantly increase your income over the course of your life. That doesn’t mean your financial health is bad. This just means your investment in yourself hasn’t yet paid off in a way that’s easily quantifiable.

Tracking your net worth over time is an easy way to show how far you’ve come.

What Net Worth is Wealthy?

Americans, on average, say that it takes a net worth of $2.27 million to be considered “wealthy,” Charles Schwab reports in its 2019 Modern Wealth Survey.

Cities with large populations of the super-rich tend to have different ideas. New York is the No. 1 city in the world by billionaire population, while San Francisco, which ranks No. 3, “is the clear leader when it comes to billionaire density,” according to data firm Wealth-X. In those places, residents say it takes much more to be considered rich. San Francisco locals say you need a net worth of at least $4 million. New Yorkers say $3.2 million.

Denver

To be wealthy, you need a net worth of $2 million. That’s about 21 times the actual median net worth of U.S. households.

Dallas

To be wealthy, you need a net worth of $2.1 million. That’s about 22 times the actual median net worth of U.S. households.

Philadelphia

To be wealthy, you need a net worth of $2.3 million. That’s about 24 times the actual median net worth of U.S. households.

Boston

To be wealthy, you need a net worth of $2.4 million. That’s about 25 times the actual median net worth of U.S. households.

Chicago

To be wealthy, you need a net worth of $2.5 million. That’s about 26 times the actual median net worth of U.S. households.

Houston

To be wealthy, you need a net worth of $2.6 million. That’s about 27 times the actual median net worth of U.S. households.

Atlanta

To be wealthy, you need a net worth of $2.8 million. That’s about 29 times the actual median net worth of U.S. households.

Seattle

To be wealthy, you need a net worth of $2.9 million. That’s about 30 times the actual median net worth of U.S. households.

Los Angeles

To be wealthy, you need a net worth of $2.9 million. That’s about 30 times the actual median net worth of U.S. households.

Washington, D.C.

To be wealthy, you need a net worth of $3 million. That’s about 31 times the actual median net worth of U.S. households.

New York

To be wealthy, you need a net worth of $3.2 million. That’s about 33 times the actual median net worth of U.S. households.

San Francisco

To be wealthy, you need a net worth of $4 million. That’s about 41 times the actual median net worth of U.S. households.

How can you Improve your Net Worth?

Your net worth can tell you many things, but it is simply a way to gauge your own financial success. Many have calculated their net worth and come to the conclusion that it is in need of a revamp, yet improving it can seem very difficult. However, it only requires some guidance, a little willpower, and a lot of patience.

1. Pay Off Your Debt

The money you owe is money that could be used to grow your net worth. Pay off all your debt as soon as you are able, but be aware of penalties that can be applied for early payment (like with mortgages).

Consolidating your debt by taking out a loan at a lower rate to pay down high-yield debt is a tried and true strategy. The bottom line here is to know what you owe and have a plan for paying it back. Make extra payments where possible and work to reduce your overall debt burden.

2. Max Out Your Retirement Contributions

Many private employers provide retirement plans that have desirable tax characteristics. Other tax-advantaged accounts (ex. a Roth IRA) are also available. In fact, many employers have matching programs that will help you grow your contribution faster.

By not taking advantage of such programs, you are leaving money on the table. Retirement contributions create a two-fold benefit. They defer your taxable income to your lowest earning years and increase your available generative assets. Taking action now for your retirement will help slow one of the biggest impediments to the growth of your net worth: taxes.

3. Cut Expenses By Realizing Expenses

Nobody likes to hear that they spend too much and need to cut back. We all know that eating out at restaurants or buying the latest gadgets catches up with us, but what we don’t realize is how quickly smaller expenses can add up, too.

Make a habit of noting your expenses every day for a week and you will be shocked by how much of your paycheck is trickling away. The intent is not to stop eating out or quit hobbies entirely, but instead to become aware of your spending habits and identify areas where you can make adjustments; a little goes a long way.

In addition, remember that debt from step one? A large bulk of that comes from credit cards. Cutting up your credit cards and using only the cash you have available will help to curb your spending.

4. Keep Money You Have Saved Where It Will Grow

You probably already have a savings account, but are you using it? Your checking account should be lean enough for your regular spending and everything else should be in interest-bearing accounts. Even better, invest what you can. Most people tend to be risk-averse, so take a look at guaranteed investment contracts​ (GICs) or index funds.

If your savings are in a coffee tin above the refrigerator, you are not making your money work for you and are undermining your hard work. As a side note, resist the urge to immediately spend any windfalls you may receive; invest it to ensure that you will continue to reap the benefits well into the future.

5. Buy the Car You Will Drive Forever

It can be practically guaranteed that a vehicle purchased today will be worth much less in one year’s time. Couple this depreciation with maintenance costs and insurance premiums and you have a recipe for the true financial cost of owning a car.

Every new car you buy ultimately decreases your net worth. You can reduce the negative financial effects of owning an automobile by purchasing only the vehicle (or vehicles) you need, with an eye to driving it until it needs to be replaced.

5. Talk to a Professional

This is the most important step and yet the most overlooked. People don’t want to pay to consult an accountant or financial advisor often because they are embarrassed about the state of their finances.

With that said, talking to a professional can get you the latest information on how to utilize tax breaks or assist you in your budgeting. Never be ashamed to ask for help and use the resources that are available.

What are the Types of Net Worth?

Companies

Net worth in business is also referred to as equity. It is generally based on the value of all assets and liabilities at the carrying value which is the value as expressed on the financial statements. To the extent items on the balance sheet do not express their true (market) value, the net worth will also be inaccurate. On reading the balance sheet, if the accumulated losses exceed the shareholder’s equity, net worth becomes negative.

Net worth in this formulation does not express the market value of a firm; a firm may be worth more (or less) if sold with a going concern.

Net worth vs. debt is a significant aspect of business loans. Business owners are required to “trade on equity” in order to further increase their net worth.

Individuals

For individuals, net worth or wealth refers to an individual’s net economic position: the value of the individual’s assets minus liabilities. Examples of assets that an individual would factor into their net worth include retirement accounts, other investments, home(s), and vehicles.

Liabilities include both secured debt (such as a home mortgage) and unsecured debt (such as consumer debt or personal loans). Typically intangible assets such as educational degrees are not factored into net worth, even though such assets positively contribute to one’s overall financial position.

For a deceased individual, net worth can be used for the value of their estate when in probate.

Individuals with considerable net worth are described in the financial services industry as high-net-worth individuals and ultra-high-net-worth individuals.

In personal finance, knowing an individual’s net worth can be important to understand their current financial standing and give a reference point for measuring future financial progress.

Government

Balance sheets that include all assets and liabilities can also be constructed for governments. Compared with government debt, a government’s net worth is an alternative measure of the government’s financial strength. Most governments utilize an accrual-based accounting system in order to provide a transparent picture of government operational costs. 

Other governments may utilize cash accounting in order to better foresee future fiscal events. The accrual-based system is more effective, however, when dealing with the overall transparency of a government’s spending. Massive governmental organizations rely on consistent and effective accounting in order to identify total net worth.

Countries

A country’s net worth is calculated as the sum of the net worth of all companies and individuals resident in this country, plus the government’s net worth. As for the United States, this measure is referred to as the financial position and totaled $123.8 trillion as of 2014.

What is Google’s Net Worth?

Alphabet Inc. (GOOG, and GOOGL) is the parent of Google, the world’s largest search engine, which dominates Internet search activity globally. The parent also is involved on a broad array of businesses, including cloud computing, software and hardware, advertising services, and mobile and desktop applications.

The company, originally called Google, was founded by Larry Page and Sergey Brin in a garage in September, 1998. Now, more than two decades later, it has grown into a tech giant, with trailing-12-month (TTM) revenue of $161.9 billion, TTM net income of $34.3 billion, and a market cap of $787.6 billion. All figures are as of March 30, 2020.

Below, we’ll look at the top five shareholders of Alphabet stock based on their ownership of Class C shares. As of this writing, three of these shareholders are institutional investors and the other two are individuals.

Larry Page

Larry Page is the co-founder of Google and a board member of Alphabet. He served as Alphabet’s CEO until December 2019, when he stepped down. He was replaced by Sundar Pichai, who is now CEO of both Alphabet and Google.

As of this writing, Page holds approximately 40.1 million shares of Alphabet Class C stock. Page is considered one of the wealthiest people in the United States with a net worth of $53 billion, according to Forbes.

Sergey Brin

Sergey Brin is the co-founder of Google and a board member of the Alphabet. He served as president of Alphabet until December 2019. Born in Russia, Sergey Brin and his family emigrated to the United States in 1979 when he was six.

While completing his doctorate in computer science at Stanford, he met Larry Page. As part of a research project, the pair developed an early version of Google. By 1998, the two founded Google and became billionaires when the company had its initial public offering in 2004.

Brin is currently the shareholder with the second-largest stake of Alphabet Class C shares, holding approximately 38.9 million shares. Brin has a net worth of $51.1 billion according to Forbes.

Vanguard Group, Inc.

Vanguard Group is one of the largest investment advisors in the U.S., with approximately 425 low-cost funds and ETFs. This firm held about $6.2 trillion in assets under management (AUM) as of January 31, 2020. Among the largest ETFs in the Vanguard stable is the Vanguard S&P 500 ETF (VOO), with approximately $122.1 billion in AUM. Vanguard holds about 22.6 million Class C shares of Alphabet.

BlackRock, Inc.

BlackRock is a global investment management company and the largest asset manager in the world. This firm held about $7.4 trillion in AUM as of December 31, 2019. BlackRock offers a wide array of mutual funds, closed-end funds, and the popular iShares line of ETFs. The company’s largest fund by AUM is its iShares Core S&P 500 ETF (IVV), which currently has AUM of $164.9 billion. BlackRock holds approximately 20.0 million Class C shares of Alphabet.

T. Rowe Price Associates, Inc.

T. Rowe Price is a publicly owned investment management company offering a variety of account management services, funds, advisory products, and more. The firm holds about $1.2 trillion in AUM. This company’s largest fund is its T. Rowe Price Blue Chip Growth Fund, currently with about $67.4 billion in AUM. T. Rowe Price holds about 12.2 million Class C shares of Alphabet.

What is Apple Net Worth?

Apple is an American multinational technology company that has a net worth of $2 trillion, as of August 2020. The history of Apple Inc. is the stuff of corporate legend. The rise, fall, and rise again of the company, has been chronicled in magazines, books, and television movies. 

When primary founder, Steve Jobs, passed away in October of 2011, people around the world mourned his death publicly.  The success of the company is of such, that there was a short amount of time during the debt-ceiling crisis that Apple, Inc. actually had a greater amount of money in their reserves than the US government.  The company employs approximately 60,000 people around the world full-time, and another 3.000 part-time.

With the introduction of the all-in-one iMac in 1998, an entirely new era began for Apple.  Since then, they have continued to expand their product line, introducing such massively popular products as the iPod, the iPhone, the MacBook Air, and the iPad.  The company has been viewed as exemplary for many years, but recently came under fire for conditions in its overseas factories.

Read Also: How to Create Actionable Financial Goals

$1 trillion: On August 2, 2018, Apple shares topped $207 for the first time ever. At that level, Apple became the first American public company to top $1 trillion in market cap.

$2 trillion: On August 19, 2020, Apple’s market cap hit $2 trillion for the first time. It’s the first American company to top $2 trillion in market cap.

Summary

Regularly calculating and tracking net worth is just one important item in your financial toolbox. Complement net worth check-ups with budget analysis and tracking software, and have a financial plan in place that incorporates short-term and long-term financial goals like buying a home and retirement. Make a budget with Tiller or Personal Capital to accomplish these goals and utilize net worth checkups to make sure you’re on track to meet them.

Remember that net worth, while a valuable indicator, does not give you the depth of information you need to fully assess your financial situation. Someone who has a lot of low-interest student loan debt, for example, maybe in a far better financial situation than someone with half as much high-interest credit card debt, though their relative net worths may indicate otherwise.