We see the term “net worth” thrown around all of the time when it comes to reporting on celebrities, sports stars, and business leaders. But what is it exactly?

Entrepreneur’s online encyclopedia defines net worth as the difference between a company’s or person’s total assets and their total liabilities.

In this guide, we’ll focus on personal net worth. Your personal net worth is a number that is just as important — if not more important — than your income. Experts suggest that you should periodically add up your personal assets and liabilities, just as you do with your business, to determine if you are in a good place or need to adjust your spending. A clear picture of your current situation will allow you to grow your net worth through some combination of decreasing liabilities and increasing assets. We’ll explain the specifics of how to do that later on.

Try our online net worth calculator

A huge reason to be thinking about assets is retirement planning. Simply put, the more assets you have, the more comfortable your retirement will be. You may also need a high personal net worth to buy a business, pursue some types of investments, purchase a second home, pay for a child’s college education, or for other purposes.

Over the course of this guide, you will learn all of the ins and outs of net worth calculation and management to secure and improve your financial future.

Related: 8 Success Lessons From the Richest Person on the Planet

Key takeaways

• Why is net worth important?
• How to calculate your net worth on your own
• How to use our online net worth calculator
• What the median net worth is for different age ranges?
• How to increase your net worth
• More resources to manage and grow your personal wealth

Why is net worth important?

The equation for your net worth is fairly simple: Assets – liabilities = net worth.

That means it is the total value of everything you own, minus the debts you have to repay, and your monthly cash flow, which shows your monthly income and spending patterns, writes Nightingale-Conant in The Power of Passive Income.

As basic as that sounds, we’re often reluctant to check in on our financial health. Many fear that their financial situation is not as good as they hoped, which can be stressful. Others avoid facing their personal finances due to a lack of basic understanding — the terminology or concepts seem daunting.

But not taking inventory of your finances is a huge mistake, according to money management experts. As Brian Tracy writes in his book Million-Dollar Habits, understanding your net worth is critical to achieving your financial goals. Do you want to become a self-made millionaire? Tracy explains, “The starting point of achieving financial independence and becoming a self-made millionaire is for you to accept complete responsibility for your financial life. Many people never do this. They instead go through their days, and their money, trusting to luck with the idea that somehow, sometime, someone else will come to the rescue. They buy lottery tickets, gamble, and think about making a killing in the stock market. And they worry about money all the time.”

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Tracy continues, “The fact is that serious money is long-term money. Most wealthy people organize their financial lives in such a way that their net worth increases by about 8 to 10 percent per year on the amount of money they have working. They do not look for get-rich-quick schemes or easy money. They are patient, persistent, and farsighted. They discipline themselves to save and accumulate money over many years. They do not speculate, take risks, or look for fast ways to make money quickly and easily. Because of these habitual ways of thinking about their money, each year their wealth grows. Eventually, they pass the million-dollar mark and usually keep on going.”

How to calculate your net worth

As we’ve said, to calculate your net worth, you will need to subtract your total liabilities from your total assets. What goes into calculating those total figures? Let’s take a look:

Included in total assets:

• Real estate
• Investments
• Savings
• Cash deposits
• Home equity
• Car equity or other similar assets

Included in total liabilities:

• Mortgages
• Credit card balances
• Student loans
• Car loans
• Recurring bills
• Taxes

Using our online net worth calculator

To use Entrepreneur’s net worth calculator (find it at the bottom of this article) you will need to gather and enter the following information into the defined fields.

• Real estate: The current value of your home (if you own it) and any other properties
• Checking account: The total amount of money you have in your checking account
• Savings account: The total amount of money you have in your savings account
• Retirement account: The total amount of money you have in IRAs, 401Ks and mutual funds
• Autos: Total current market value of your vehicles (cars, trucks, boats)
• Other assets: Any other accounts, the current market value of other sellable assets
• Mortgages: The amount of money owed on your mortgage loan(s).
• Consumer debt: Total credit card balances, unsecured personal loans and payday loans.
• Personal loans: Any money you’ve borrowed from a bank or other financial institution.
• Student loans: The total balance on an outstanding student loan or loans.
• Auto loans: The total balance of your auto loan(s).
• Other debts: Any other balances you are committed to paying off.

How does your net worth compare to others?

Every three years, the Federal Reserve Board issues the Survey of Consumer Finances, which includes information about taxpayers’ incomes, net worth, credit usage and more. The most recent report was released in 2020, pulling together data collected from 2016 to 2019.

Per the report, in the 2016-2019 time period:

• Americans’ average net worth rose 2 percent.
• Families at the top of the income and wealth distributions experienced very little, if any, growth in mean net worth.
• Families near the bottom of the income and wealth distributions generally continued to experience substantial gains.
• About 13 percent of families owned a privately held business. Business ownership increases with income, and nearly 40 percent of families in the top decile of the income distribution owned a business.
• Wealth continued to increase among families with either a high school diploma or some college. But families without a high school diploma saw the largest drops.

Here’s how that all breaks down by age and average. Some of the averages will seem very high. That’s because affluent families bump up that number significantly. Look at the median net worth, which are the midpoint values in the calculations for a more useful comparison point.

• Age of head of household: Less than 35
• Median net worth: $13,900
• Average net worth: $76,300
• Age of head of household: 35-44
• Median net worth: $91,300
• Average net worth: $436,200
• Age of head of household: 45-54
• Median net worth: $168,600
• Average net worth: $833,200
• Age of head of household: 55-64
• Median net worth: $212,500
• Average net worth: $1,175,900
• Age of head of household: 65-74
• Median net worth: $266,400
• Average net worth: $1,217,700
• Age of head of household: 75+
• Median net worth: $254,800
• Average net worth: $977,600

How to increase your net worth

To increase your net worth, you want to decrease your liabilities (debts) while maintaining or increasing your savings. Below are some specific ways to go about that. Yes, some of these suggestions are easier said than done but don’t give up. The prevailing advice from experts is to simply do what you can. Every little bit helps when it comes to building wealth and good financial habits. Remember, this is not a sprint — it’s a marathon that requires discipline and patience. Focus on paying down your debts with the highest interest rates.

As Nightingale-Conant in The Power of Passive Income, “Credit card debt in particular—can paralyze you financially even if you’re totally up to speed in every other way. You can be motivated, intelligent, creative, and everything else, but if you’re having to service debt every month, you’re not going to have the small initial investment capital you need.”

Nightingale-Conant continues, “The first step is a bit of honest self-assessment. Many people feel so badly about their consumer debt that they actually don’t know how much they have. They’d rather not think about it, so they just pay the bills every month and put it out of their thoughts. That’s not the way to make credit card debt go away, however. Start by determining exactly how much you owe. Frightening as that may seem, you’ll actually feel better once you have a dollars-and-cents figure to deal with.”

Increase your retirement savings

Entrepreneur magazine experts recommend that you contribute as much to your 401(k) plan as possible up to the contribution limit. (In 2023, the max total between you and your employer is $66,000.)

The ideal retirement contribution percentage varies depending on your age, the cost of living, and your personal finances. For example, it may be a good idea to contribute between 10% and 15% of all your gross income toward retirement. You can contribute this amount toward a 401(k) or a 401(k) combined with an IRA (individual retirement account) in your 20s and 30s. If you are behind in retirement savings in your 40s or 50s, consider contributing more to your 401(k) account. If you’ve already hit your 401(k) plan limit, look into alternatives like IRAs or Roth IRAs.

Cut back on any unnecessary expenses

“When you develop the habit of thinking more carefully about your income and savings, you will soon find yourself spending less and less on your day-to-day expenses,” writes Brian Tracy in Million-Dollar Habits. “You will begin paying down your debts and not incurring new ones. You will start delaying or deferring expenditures and finally stop buying those items entirely.”

Here are some common areas you can cut back on:

• Unsubscribe from unused content subscriptions
• Cut back or cancel streaming services
• Reduce or cancel your cable TV plan
• Reduce your cell phone plan
• Cancel unused gym memberships

Use auto savings to create an emergency savings fund

Automatic transfers allow you to have a set amount of money transferred into your savings account each month. You can do this through online banking accounts. Most institutions allow you to choose a specific dollar amount or a percentage of each paycheck to transfer into your savings.

Refinance your mortgage

Depending on where rates currently are, refinancing to a lower rate can help lower your monthly payment, save money on interest payments and help pay off your mortgage sooner. You can also change the duration of your mortgage. So if you have 20 years left on your mortgage, you can decide to refinance into a 15-year loan which may increase your monthly payments but save on the overall amount you’ll spend in interest payments.

The following are just a few of the benefits of refinancing your mortgage to help with your savings goals:

• Lower your interest rate to save on monthly payments.
• Put any “extra” money from those monthly payments into savings.
• Shorten the length of your mortgage for a quicker payoff.
• When rates are attractive, change from an adjustable rate to a fixed-rate mortgage to provide more financial stability.

Increase your salary

If you are employed, think about asking for a raise, keeping in mind these tips from Sam McRoberts:

• Learn your worth by checking online resources dedicated to gathering and providing data about salaries throughout the world, including Glassdoor, Salary, and job-hunting sites like Indeed. Spend a few hours examining what people like you in places like yours make per year.
• Make sure you ask for more than you think you can get (but not too much more), arm yourself with facts, be prepared to stand your ground and don’t be afraid to face rejection.
• Think about timing. Don’t ask for a raise immediately after the company gets some bad news, or when you know money is tight, or even when your boss appears to be in a bad mood. Instead, wait until you’ve accomplished something especially significant, or wait until the end of the year, after a glowing performance review.

Set specific financial goals

It’s simple psychology: The more clearly you define your financial goals, the more motivated you’ll be to make wise financial choices.

“The benefit of setting goals is really to help yourself achieve what you want to achieve,” said Elizabeth Koraca, an executive coach and career strategist. “You have to have clarity on what you want and a clear path how to get there.”

Ask yourself what excites you. Is it owning a home? Putting the kids through college? Starting your own business? Once you know what you want, you’ll have the inspiration you need to stick to those goals.

Allison Task, a career and life coach uses SMART goal setting to help people. SMART is an acronym for:

Specific: Goals need to be focused and have exact details.

Measurable: Have a metric for tracking progress.

Attainable: Goals need to be realistic.

Relevant: Your goals should be things you have a genuine passion for.

Time-bound: Set a timeframe for achieving your goal.

“By using this framework, you are more likely to achieve the goal, because you will think through the specifics of what needs to happen for you to do it,” Task said.

Find passive income revenue streams

Nightingale-Conant, in The Power of Passive Income, encourages entrepreneurs to find online side hustles that they can pursue during off hours. And importantly, based on topics that they have a genuine passion for. “One thing that is really exciting about being an online entrepreneur is that often the paths with the lowest barriers to entry center on topics you are already familiar with. Making money online is exciting. Making money online about a topic you love is even better. That’s when your work doesn’t feel like work. For this reason, listing the hobbies, interests, and topics you’re experienced in is really helpful. When you’re evaluating some of these ideas, already being aware of niches and industries that you have some advanced knowledge of will be helpful to you. There is no interest that doesn’t count.”

Here are a few areas to think about:

Hobbies

• Do you have hobbies about which you are passionate? Perhaps you belly dance or sail, or are really into massively multiplayer online role-playing games like Fortnite.
• Do you show dogs?
• Do you run a playgroup for moms?
• Are you an artist?
• Do you play any sports?
• Do you love to travel?
• Are you an avid photographer?
• Do you sew?
• Any area of interest is fair game online.

Education

• Do you have a degree or certification in anything?
• Do you have a psychology degree?
• Are you a certified doula?
• Did you get a certification or training program in something else?

Profession

• Are you or were you at any time a nurse?
• Have you worked as a dental hygienist?
• Did you work in a flower shop and can make wicked flower arrangements?
• Do you have experience ramping up for online success in event planning?
• Have you worked in real estate off and on your whole life?

Everyday life

• Are you a fashionista?
• Do you follow the current music scene?
• Are you interested in politics?
• Are you a parent?
• Are you a corporate executive?
• Are you an extreme couponer?

These are just a few examples to get your juices flowing. If you have something you are passionate about or interested in, there are tons of other people who are, too.

Related: How Networking Can Increase Your Business’ Net Worth