What you own minus what you oweThat is your net worth.
Use one number to establish today’s starting point, then take snapshots to make progress visible over time.
How to interpret net worth
Net worth equals the current value of assets minus outstanding liabilities. It is a balance-sheet snapshot, not a measure of monthly cash flow, investment performance, or personal success. Comparing snapshots taken with the same valuation approach is generally more useful than comparing your number with someone else’s.
Use current account balances for cash and debt. For investments, use current market value. For property or other difficult-to-price assets, document a reasonable method and apply it consistently. Avoid counting future wages, uncertain inheritances, or the same asset in more than one category.
A practical example
If assets total $250,000 and liabilities total $175,000, net worth is $75,000. Paying $1,000 toward principal increases net worth by approximately $1,000 when every other value is unchanged; interest and ordinary expenses do not reduce principal dollar for dollar.