Net Worth

Net worth refers to the value of total assets minus total liabilities of an individual or a company. Net worth may also be called ‘net assets,’ ‘shareholders’ equity,’ or ‘book value’ (the latter two terms are used to indicate a company’s net worth).

Net worth is calculated by adding all of a person or corporations assets and then subtracting the sum of all of the party’s liabilities. Assets include stocks, stock funds, bonds, bond funds, savings accounts, CDs, 401k, IRAs, SEPs, annuities, primary residence value, property value, and the values of tangible collectibles such as art, jewelry, or furniture. Liabilities, or debts, can include mortgages, home-equity loans, student loans, and credit cards. All of the values for assets and liabilities are taken from the company’s financial reporting measures, including the balance sheet. If the balance sheet does not contain accurate numbers, the net worth will be erroneous.

The majority of Americans (a little over 30%) have a net worth of less than $25,000. The average 30-year-old has a net worth of $2,125. The average person who makes $100,000 has a net worth of $363,125. Remember, these are just averages – there is tremendous variability among people who are actually in these age and income categories. However, financial advisors say it’s a good idea to regularly assess net worth in order to have a better financial sense of your assets and liabilities.