Net worth
The total value of what you own minus the total value of what you owe. One number that summarises your financial position.
Net worth is assets minus liabilities: cash, investments, home equity, vehicle value (depreciated), and any other significant assets, minus credit card balances, student loans, car loans, mortgage balance, and other debts.
It's the single most useful long-term metric in personal finance. Income tells you the flow; net worth tells you the stock. A person earning $200k a year with $300k of consumer debt has a worse financial position than someone earning $60k with $80k saved — and net worth is the number that makes that visible.
Track it once a quarter, not weekly. Daily swings (especially in invested assets) are noise. The trend over years is the signal.
A common rookie mistake is including depreciating consumer goods (TVs, electronics, furniture) in the assets column. They're not net-worth assets — you couldn't sell them tomorrow for what you paid. Only count things that hold or grow in resale value.
See also
- Emergency fund — Cash set aside in a safe, accessible account specifically for unplanned expenses or income loss.
- Savings rate — The percentage of your take-home pay you save or invest each month. The single biggest lever on when you can retire.
- Compound interest — Interest earned not just on your original deposit, but on the interest that's already been added to it. The engine of long-term wealth.
- Debt-to-income ratio (DTI) — Total monthly debt payments divided by gross monthly income. Lenders use it to decide whether you can afford more borrowing.
Ask Cashowa about net worth
Apply this concept to your actual numbers — with verifiable math.