Net worth
Build a personal balance sheet and read two numbers from it: net worth, and liquid net worth. The second is the one that matters when income stops, because a house cannot pay a mortgage from the inside.
| Line | Amount | Share of total |
|---|---|---|
| Cash & deposits | $12,000 | 2.9% |
| Investments | $68,000 | 16.6% |
| Property | $320,000 | 78.2% |
| Other assets | $9,000 | 2.2% |
| Total assets | $409,000 | 100.0% |
| Mortgage | -$214,000 | 52.3% |
| Loans | -$18,000 | 4.4% |
| Credit cards | -$4,200 | 1.0% |
| Net worth | +$172,800 | — |
| Liquid net worth | -$156,200 | — |
Property counts at market value but is illiquid — liquid net worth is the number that matters if income stops.
ΣA − ΣL · assets at market, not purchase price
(cash + investments) − ΣL · excludes property and other illiquid holdings
ΣL / ΣA · how much of the sheet is financed by debt
cash / monthly debt service · months of cover from liquid reserves
A clear path from inputs to results.
Net worth is one number with two readings. Total net worth says where you stand; liquid net worth says how long you could survive without income. A household can be worth seven figures and still be one missed paycheque from trouble.
How to use
- List assets at market value: cash, investments, property, other.
- List liabilities at outstanding balance: mortgage, loans, cards.
- Read net worth as the difference.
- Check liquid net worth — liquid assets minus all liabilities.
- Look at leverage to see how much of the balance sheet is debt-financed.
The formula
Reference: Standard personal financial statement — assets at fair market value less liabilities (Brigham & Ehrhardt, Financial Management).
Worked example
Typical mid-career household
- Cash $12,000; investments $68,000; property $320,000; other $9,000.
- Mortgage $214,000; loans $18,000; cards $4,200.
- 1
Total assets: 12,000 + 68,000 + 320,000 + 9,000 = $409,000.
- 2
Total liabilities: 214,000 + 18,000 + 4,200 = $236,200.
- 3
Net worth: $172,800.
- 4
Liquid net worth: 80,000 − 236,200 = −$156,200.
- 5
Leverage: 236,200 / 409,000 = 57.8% of assets are debt-financed.
Net worth $172,800 but liquid net worth −$156,200: solvent on paper, illiquid in practice.
Interpreting the result
The negative liquid figure is normal for a homeowner with a mortgage, and it is not an emergency — it simply means the property is doing the work. What matters is the runway: months of debt service covered by cash. A useful target is three to six months of essential spending in liquid form before counting investments.
Assumptions & limitations
- Property is counted at a realistic sale price, not the asking price or the assessed value.
- Retirement accounts are counted at balance, which overstates spendable value because withdrawals are taxed.
- Cars are excluded or counted at trade-in value, since they depreciate and are not investments.
- No contingent liabilities such as guarantees or pending litigation are included.
Frequently asked questions
Should I include my home?
Yes in net worth, but always show liquid net worth separately. A house cannot pay a mortgage from the inside, and its value is not spendable without selling or borrowing.
How often should I recalculate?
Quarterly is enough. Monthly tracking adds noise and encourages reacting to market moves that do not change the plan.
Do I count retirement accounts?
Yes, but at a discount for the tax due on withdrawal if you want a spendable figure. Counting a 401(k) at balance overstates what you can actually use.
Is negative net worth bad?
Not necessarily — a recent graduate with student loans often has negative net worth and excellent prospects. What matters is the direction and the liquidity runway.
Methodology last reviewed 2026-10-18. Results are informational and not financial or engineering advice — see our disclaimer.