How is net worth calculated?
Total assets minus total liabilities. Assets include cash, savings, investments, pensions, property and vehicles at realistic current value. Liabilities include mortgages, loans, credit-card balances, overdrafts and any tax owed. The result can be negative, which is entirely normal early in a career or after buying a home, and says little on its own — the trend matters far more than the level.
Should I include my home and pension?
Include both, but understand what each contributes. A home is an asset at market value less the outstanding mortgage, though it is illiquid and you still need somewhere to live. A pension is often the largest asset for people in mid-career but is inaccessible until retirement age. Some people track two figures — total net worth and liquid net worth excluding home and pension — because the second is what is actually available.
How should I value assets I might not sell?
Conservatively and at realistic resale value, not purchase price or sentimental value. Cars depreciate steeply; furniture and electronics are worth a fraction of what they cost. A common rule is to exclude personal possessions below a threshold entirely, since valuing a wardrobe adds noise without insight. Overstating assets is the most common way people flatter their own figure.
What is a good net worth for my age?
Benchmarks exist but are of limited use, because they ignore cost of living, career stage, dependants, health, inheritance and country. A more useful measure is your own trajectory: is the figure rising year on year, and is the rate consistent with your goals? Comparing against a national median tells you about the country's wealth distribution, not about whether you are on track.
How often should I calculate it?
Quarterly or twice a year is enough. Monthly invites reacting to market noise, since investment values move constantly for reasons unrelated to your behaviour. What matters is the direction over years. Recording the same categories each time makes the comparison meaningful — changing what you include mid-way makes the trend uninterpretable.
Why is net worth more useful than income?
Because income measures flow and net worth measures position. Two people earning identically can have wildly different net worth depending on spending, debt and how long they have been saving. Net worth also captures progress that income hides — paying down a mortgage does not change your salary but improves your position every month. It is the closer measure of financial security.