Net Worth Calculator

The Foundation of Financial Health

Net worth is the clearest measure of your financial progress over time. Here is why it matters more than income:

Net Worth vs. Income:

Real-World Example:

Person A: $200,000 income, $50,000 net worth (high lifestyle, no savings) Person B: $75,000 income, $500,000 net worth (lived below means, invested)

Person B has far more financial security despite earning less. They could survive years without income; Person A could not survive months.

Net Worth is a Lagging Indicator:

Your net worth today reflects decades of financial decisions. This is both good news (bad years can be overcome) and a warning (good years are not enough if not capitalized on).

Tracking Frequency:

• Monthly: Too volatile (market swings distort progress)
• Annually: Good for most people
• Quarterly: Good if actively paying debt or investing
• At major life events: Always (marriage, home purchase, job change)

2022 Survey of Consumer Finances Breakdown

The Federal Reserve data shows net worth varies dramatically by age, reflecting compound growth over time:

Under 35 (Starting Out):

• Median: $39,000
• 25th percentile: ~$5,000
• 75th percentile: ~$130,000
• Many have negative net worth due to student loans
• Key: Focus on debt payoff and building emergency fund

Ages 35-44 (Building Years):

• Median: $135,600
• 25th percentile: ~$25,000
• 75th percentile: ~$350,000
• Peak earning years begin
• Home purchase often occurs in this range
• Key: Maximize retirement contributions, pay down mortgage

Ages 45-54 (Peak Accumulation):

• Median: $247,200
• 25th percentile: ~$50,000
• 75th percentile: ~$650,000
• Highest earning potential
• Kids may be in college (expensive)
• Key: Catch-up retirement contributions allowed at 50

Ages 55-64 (Pre-Retirement):

• Median: $364,500
• 25th percentile: ~$75,000
• 75th percentile: ~$1,000,000
• Focus shifts to retirement readiness
• Key: Calculate retirement needs, consider downsizing

Ages 65-74 (Early Retirement):

• Median: $409,900
• Peak net worth for most Americans
• Social Security and pensions begin
• Key: Manage withdrawals, healthcare costs

Ages 75+ (Later Retirement):

• Median: $335,600
• Net worth often declines (spending down assets)
• Healthcare becomes major expense
• Key: Estate planning, long-term care considerations

Assets: What to Count

Not all assets should be counted equally. Here is a practical guide:

Definitely Include:

• Cash in all bank accounts (checking, savings, money market)
• Retirement accounts at current value (401k, IRA, Roth IRA, 403b, SEP)
• Brokerage accounts (stocks, bonds, ETFs, mutual funds)
• Real estate at current market value (Zillow, Redfin, or recent appraisal)
• Business equity if you could sell it (conservative estimate)
• Cryptocurrency holdings

Include but Be Conservative:

• Vehicles (use Kelley Blue Book private party value, not retail)
• Life insurance cash value (not death benefit)
• Art, jewelry, collectibles (only if you would actually sell)
• Pending inheritances (do NOT include - too uncertain)

Do Not Include:

• Future Social Security (important but not liquid wealth)
• Pension present value (unless vested and portable)
• Future earning potential
• Items with sentimental but no resale value

Liabilities: What to Count

Include ALL debts:

• Mortgages (primary and investment properties)
• Home equity loans and HELOCs (outstanding balance)
• Auto loans
• Student loans (federal and private)
• Credit card balances (all cards, full statement balance)
• Personal loans
• 401k loans (you owe this to yourself)
• Medical debt
• Tax debt
• Any cosigned loans you may need to pay

The Home Value Debate:

Some advisors exclude primary home equity from net worth because you cannot access it without selling or borrowing. However, the standard approach includes it because:

1. You could downsize and extract equity
2. It can be borrowed against (HELOC)
3. It is a real asset that grows

Both approaches are valid - just be consistent over time.

What is a Good Debt-to-Asset Ratio?

Your debt-to-asset ratio shows what percentage of your assets is offset by debt:

Formula: Debt-to-Asset Ratio = (Total Liabilities / Total Assets) x 100

Interpretation Guide:

Why This Ratio Matters:

1. Lender perspective: Banks use similar ratios for loan approvals
2. Risk indicator: Higher ratios mean more vulnerability to economic shocks
3. Progress metric: Should decrease over time as you pay debt and grow assets

Examples:

• Young professional: $300K home, $250K mortgage, $50K 401k, $20K car, $15K car loan

  • Assets: $370K, Liabilities: $265K, Ratio: 72% (fair - typical for new homeowner)

• Mid-career: $500K home, $200K mortgage, $400K retirement, $40K vehicles, $20K car loan

  • Assets: $940K, Liabilities: $220K, Ratio: 23% (excellent)

• Retiree: $400K home (paid off), $1.2M investments, no debt

  • Assets: $1.6M, Liabilities: $0, Ratio: 0% (excellent)

How to Improve Your Ratio:

1. Pay down debt (especially high-interest)
2. Increase retirement contributions
3. Let compound growth do the work
4. Avoid new debt for depreciating assets

The Two Levers of Wealth Building

Net worth grows through two mechanisms: increasing assets and decreasing liabilities. Here are proven strategies for each:

Increase Assets:

1. Maximize Employer Matches

   • 401(k) match is 100% immediate return
   • If employer matches 50% up to 6%, contribute at least 6%
   • Missing the match is leaving money on the table

2. Automate Investing

   • Set up automatic transfers to brokerage/retirement accounts
   • "Pay yourself first" works because you adjust spending to what remains
   • Even $100/month becomes $33,000 in 15 years at 7% returns

3. Invest in Low-Cost Index Funds

   • S&P 500 index funds average ~10% annual returns historically
   • 0.03% expense ratios vs 1%+ for active funds
   • Time in market beats timing the market

4. Build Home Equity

   • Extra principal payments reduce mortgage term
   • Biweekly payments = one extra payment/year
   • Refinance if rates drop significantly

5. Increase Income

   • Job changes often yield 10-20% salary bumps
   • Side income accelerates wealth building
   • Invest raises rather than inflating lifestyle

Decrease Liabilities:

1. Attack High-Interest Debt First (Avalanche Method)

   • Credit cards at 20%+ APR cost you the most
   • Paying minimums on $10K at 20% = $4,600 in interest

2. Refinance When Possible

   • Mortgage refinance if rate is 0.75%+ lower
   • Student loan refinance (if federal protections not needed)
   • Auto loan refinance if credit improved

3. Avoid New Consumer Debt

   • Cars depreciate 20% year one
   • Buy used, pay cash when possible
   • Credit cards: pay statement balance monthly

4. Use Debt Strategically

   • Mortgage on appreciating home: OK
   • Low-rate student loans for high-ROI degree: OK
   • Car loan for new luxury vehicle: avoid

The Math of Compound Growth:

Assuming 7% annual returns

Mistakes That Keep People Poor

These errors prevent people from building wealth:

1. Not Tracking Net Worth at All

• 65% of Americans do not know their net worth
• What gets measured gets managed
• Annual tracking reveals trends and problems

2. Overvaluing Illiquid Assets

• That vintage car collection is not worth what you think
• Art, jewelry, collectibles rarely sell at "appraised" value
• Use conservative, realistic estimates

3. Ignoring Lifestyle Inflation

• Earning more but spending more = no progress
• Lifestyle creep is the #1 wealth killer for high earners
• Save at least 50% of every raise

4. Carrying High-Interest Debt

• Investing while holding 20% APR credit card debt makes no sense
• Guaranteed 20% return by paying off the card
• Exception: always get employer 401k match first

5. Comparing to the Wrong People

• Social media shows curated highlight reels
• Many "wealthy-looking" people are broke
• Compare to your past self and age-appropriate medians

6. Excluding Spouse or Partner

• Joint finances require joint tracking
• Hidden debt destroys marriages
• Regular "money dates" improve outcomes

7. Panic Selling During Downturns

• 2008 crash: market dropped 37%, recovered by 2013
• 2020 crash: market dropped 34%, recovered in 5 months
• Selling low locks in losses permanently

8. Waiting to Start Investing

• $500/month from age 25-65 = $1.6M (at 7%)
• $500/month from age 35-65 = $720K (at 7%)
• The 10-year delay costs $880,000

9. No Emergency Fund

• Unexpected expenses become debt
• 3-6 months expenses in savings before heavy investing
• This prevents selling investments at the worst time

10. Being Too Conservative

• 100% savings accounts at 4% lose to inflation
• Young people especially need stock market exposure
• Time horizon determines appropriate risk level