What Is Net Worth (and Why You Should Totally Care!)

In simple terms, net worth is what’s left after you subtract what you owe from what you own.

Formula:
Net Worth = Assets – Liabilities

That’s it! One simple calculation that gives you a snapshot of your financial health — kind of like your money selfie.

Banks and lenders look at it before approving loans or investments. But most importantly, you should track it for your own growth.

An asset is anything that has monetary value. Basically, it’s the stuff that could put cash in your pocket.

Examples of assets:

• Cash or money in your checking/savings accounts

• Investments (stocks, ETFs, crypto, etc.)

• Retirement accounts (RRSP, TFSA, 401k, etc.)

• Real estate or property

• Vehicles, jewelry, or valuable equipment

💡 Pro tip: Assets are usually grouped as:

• Current assets – cash or short-term investments

• Long-term assets – real estate, vehicles, and other big-ticket items

Liabilities are all the financial obligations you owe — the things that take money out of your pocket.

Examples:

• Mortgages

• Car loans

• Credit card balances

• Student loans

• Any other unpaid bills

They can also be divided into:

• Current liabilities: short-term debts (credit cards, monthly bills)

• Long-term liabilities: bigger debts like your mortgage

Your net worth can be:

✅ Positive — when your assets are greater than your debts (you’re building wealth!)

❌ Negative — when your debts are greater than your assets (don’t panic, it’s fixable!)

A positive or growing net worth = healthy finances.
A declining or negative net worth = time to review your spending or debt situation.

You can’t improve what you don’t measure.

Tracking your net worth helps you:

• See if you’re moving forward financially

• Stay motivated to save and invest

• Understand how debt affects your finances

• Set realistic goals and track your progress

Even if your net worth isn’t where you want it to be — that’s okay! Awareness is power.

Let’s use an example so you can see it in action:

Assets:

• Home value: $500,000

• Investment portfolio: $100,000

• Vehicle value: $35,000

Liabilities:

• Mortgage: $200,000

• Car loan: $15,000

Net Worth = ($500,000 + $100,000 + $35,000) – ($200,000 + $15,000) = $420,000

👉 That means your net worth is $420,000.

Now fast forward a few years:

New assets:

• Home value: $525,000

• Investments: $150,000

• Vehicles: $25,000

New liabilities:

• Mortgage: $180,000

• Car loans: $0

New Net Worth = ($525,000 + $150,000 + $25,000) – ($180,000) = $520,000

Despite your car losing value, your overall net worth increased by $100,000 — thanks to growing investments and paying down debt. 💪

If you run a business, your balance sheet is basically your company’s net worth statement.

In accounting terms, this is called book value — the historical cost of your assets minus liabilities.

When businesses apply for loans, lenders look at net worth to assess repayment ability. A company with rising profits usually has a growing net worth — and that’s often reflected in higher stock prices for public companies.