Net Worth Explained: How to Calculate It (2026 Guide)

Last updated: October 27, 2026 · Written by David Chen

Calculating your net worth is the most important step in understanding your true financial health. Unlike your salary, which only shows how much you earn each year, your net worth tracks what you actually own over time — and it's the number that predicts whether you'll be able to retire comfortably, weather a job loss, or afford a home down payment.

Why Your Salary Doesn't Matter

There are two types of people: the doctor making $250,000/year who drives a leased BMW, has a $200k mortgage, and $80,000 in student loans, and the teacher making $60,000/year who has a paid-off car, $50,000 in retirement savings, and no credit card debt. Who is wealthier?

The teacher. Because net worth — not your salary — is the actual measure of your financial health. A high salary with high expenses and debt can leave you broke. A modest salary saved and invested consistently can make you a millionaire by retirement.

What Is Net Worth?

Net worth is the total value of everything you own minus everything you owe. The formula is simple:

Net Worth = Total Assets − Total Liabilities

If your assets are worth more than your debts, you have a positive net worth. If your debts are bigger, you have negative net worth (which is very common for new college grads with student loans).

What Counts as an Asset?

Assets are everything you own that has cash value:

• Cash in checking and savings accounts
• Investment accounts: 401(k), IRA, brokerage, HSA
• Your home equity (current market value minus what you owe on the mortgage)
• Your car (at its current resale value, not what you paid for it)
• Any other property: jewelry, art, collectibles, rental real estate
• Money owed to you (personal loans you've made)

What Counts as a Liability?

Liabilities are all your debts and financial obligations:

• Mortgage balance
• Car loans
• Credit card balances
• Student loans
• Personal loans, medical debt, payday loans
• Any other money you owe

Average Net Worth by Age (2026 Federal Reserve Data)

The Federal Reserve releases a Survey of Consumer Finances every 3 years. Here are the median net worth numbers for US households:

Age Range	Median Net Worth	Average (Mean) Net Worth
Under 35	$14,000	$49,000
35 – 44	$90,000	$230,000
45 – 54	$165,000	$490,000
55 – 64	$240,000	$690,000
65 – 74	$260,000	$900,000
75+	$250,000	$670,000

Data: 2022 Federal Reserve Survey of Consumer Finances (latest available), adjusted for 2026 inflation.

Notice the big gap between median and average net worth. That's because a tiny number of multi-millionaires pull the average way up. The median (middle) number is what a typical household actually has.

Average Net Worth by Age (2026, Federal Reserve Data)

Age Bracket	Median Net Worth	Mean Net Worth
Under 35	$39,000	$183,000
35-44	$135,000	$578,000
45-54	$247,000	$958,000
55-64	$364,000	$1,565,000
65+	$366,000	$1,217,000

Source: 2022 Federal Reserve Survey of Consumer Finances, adjusted for 4% annual inflation to 2026 dollars. Median is the more useful number for most people — mean is pulled up by the top 10% of households.

How to Increase Your Net Worth

Your net worth only goes up in two ways: you increase your assets, or you decrease your liabilities. That's it. Every financial decision should be judged by whether it moves your net worth up or down.

1. Pay Off High-Interest Debt

Paying off a 20% credit card balance is like getting a guaranteed 20% return on your money. There's no investment out there that gives you a guaranteed 20% risk-free return. Paying off credit card debt is the highest-return investment you can make.

2. Save and Invest Consistently

Compound interest does the heavy lifting. If you invest $500/month at 7% average return, you'll have $500,000 in 30 years. Time in the market beats timing the market.

3. Spend Less Than You Earn

This is the boring truth. Every dollar you spend on a depreciating asset (a new car, designer clothes, a fancy vacation you can't afford) is a dollar that isn't growing your net worth. That doesn't mean you can't enjoy your money — but there's a big difference between spending and buying assets that go up in value.

How Often Should You Check Your Net Worth?

You should calculate your net worth once every 3-6 months. It's a lagging indicator — it doesn't change week to week. Checking it once a quarter lets you see your long-term progress, without stressing about daily market ups and downs.

Use our free net worth calculator to calculate your net worth in 2 minutes, and see how you compare to other people your age.

Important Note: Figures on this page are based on 2026 public data and are intended as rough guides. Actual amounts will vary based on your specific situation. We recommend speaking with a licensed advisor for personalized guidance.