What is Net Worth: Why and How to Calculate Net Worth [2024]

We read about celebrity net worths all the time, but did you know you should know your net worth too? Why, you ask? Because calculating your net worth helps you understand your finances better. Read on to find out yours today.
What is Net Worth: Why and How to Calculate Net Worth [2024]
Net worth is the difference between assets and liabilities. Net worth indicates your overall financial situation. Calculating your net worth helps identify your problem areas and set realistic financial goals.
In this article

Do you know Elon Musk and Taylor Swift’s net worth but not yours? Do you think net worth is only for the rich and the famous? If yes, then you should read further to know the five reasons why you should calculate your net worth since it is as important as that of any celebrity.

Before you start the number crunching and begin to calculate your net worth, it is important to understand some terms first.

What is net worth?

Net worth simply means how much you own minus how much you owe. In slightly complex terms, it is the difference between assets and liabilities. Net worth = Assets – Liabilities

What are assets?

Assets are the things that you own. Assets include:

  • Cash
  • Bank accounts
  • Brokerage accounts
  • Savings
  • Real estate
  • Personal property like car or jewelry
  • Collectibles

What are liabilities?

Liabilities are the things that you owe. Liabilities include:

  • Credit card dues
  • Mortgage
  • Personal loan
  • Student loan 
  • Any kind of debt

Want to read about the net worth of some popular people, read our blog. Here are the five reasons you should know your net worth.

To know your financial status

This is sort of a reality check. Looking at your net worth will give you a clear picture of where your finances stand and where they should be. 

Let’s look at two examples, to understand the concept better:

Example 1:

  • Savings = $10,000
  • Current value of car = $5,000
  • Student loan = $10,000 
  • Net worth is $5,000 {($10,000 + $5,000) – ($10,000)}

Example 2:

  • Savings = $3,000
  • Current value of car = $5,000
  • Student loan = $10,000 
  • Net worth is -$2,000 {($3,000 + $5,000) – ($10,000)}

Negative net worth means you owe more than you own. Don’t be scared if this happens. It is absolutely normal to start with negative net worth but it is equally important that you know your situation and start working toward making it positive. 

Negative net worth doesn’t mean you’re financially irresponsible. It means that right now your debts are more than what you have in assets. This is fine because maybe you just started your career and have a student loan. Don’t worry because you will gradually repay that loan and your net worth will increase. 

If your net worth is positive, you should try to increase it by building on more assets and reducing debts.

Also, keep in mind that net worth is something that keeps fluctuating, so don’t panic when you see ups and downs in your spreadsheet.

To identify financial problems

Knowing your net worth helps you identify which are the problem areas in your finances. You can fix them only when you know them. Approach your problems before it’s too late. 

You will know what costs bring your net worth down and how you can cut down on those expenses. You can plan to save and invest more if you have too many liabilities. 

Calculating your net worth also helps you review your spending habits. For example: Is it wise to buy a fancy pair of sunglasses on a credit card? Should you take a personal loan to go on a vacation? These kinds of actions increase your liabilities. Tracking your net worth will help you spend wisely. You can easily identify your wants and needs.

To set financial goals

The knowledge of your net worth helps you set long-term and short-term goals. You can be clear about your financial goals only when you know what your current financial health is. 

Once you have your net worth calculated, you will know how much you want to grow your assets and how to save or invest more to reduce debts. 

This will also help you identify your liquidity. Liquid net worth comprises the assets which can be easily and quickly converted to cash. In case of a financial crisis or emergency, you can use your liquid assets. 

To pay off debts

When you have a clear snapshot of your liabilities, you can work on reducing your debt load. You can try to pay off some of your high-interest debt with some cash. This will help you save money on the loan interest and will be positive for your net worth in the long run. You should always work towards minimizing your obligations.

To plan for retirement 

It is impossible to set your retirement goals without the knowledge of your net worth. You definitely don’t want to carry your liabilities to your retirement years. To secure your future, you need to assess your current financial situation. Building a retirement fund will also improve your net worth figure. 

You should review your net worth over time, maybe yearly or on a quarterly basis. When you do that, remember some assets like cars or jewelry are depreciating which means their value decreases with time. You need to know their value at the time of calculating your net worth. 

Calculating your net worth might seem an uphill task but we have made it easier for you. You can use Beem’s retirement calculator and calculate your net worth in a few minutes!

Was this helpful?

Did you like the post or would you like to give some feedback? Let us know your opinion by clicking one of the buttons below!

Manali Misra

Manali Misra

Manali is a producer and writer with a diverse background in print, web, and broadcast media. She gives form to ideas through visuals and words. Manali has nearly six years of experience in creating personal finance TV shows. In her free time, you will find her curled up with a book or exploring new places on her adventure bike.

This page is purely informational. Beem does not provide financial, legal or accounting advice. This article has been prepared for informational purposes only. It is not intended to provide financial, legal or accounting advice and should not be relied on for the same. Please consult your own financial, legal and accounting advisors before engaging in any transactions.

Related Posts

Kanye West
Kanye West Net Worth 2024: Biography, Career and Salary
Kanye West. The name brings up a range of emotions. Known for unabashed attitude of speaking whatever comes to his mind and his controversial opinions on music, religion and his fellow human beings, Kanye West is synonymous with fame. The world knows Kanye West, but do you know what he does with his money?
Cardi B
Cardi B Net Worth 2024: Biography, Career and Salary
Think Cardi B and money, music and memes come to mind. The woman who changed the face of rap forever may say it's okurr to be a baddie, but at heart she's a softie for several charitable ventures. She even matches the amounts her fans have given for various causes.
Dwayne Johnson
Dwayne Johnson Net Worth 2024: Biography, Career and Salary
Think muscles, money and the moves and there are chances Dwayne The Rock Johnson pops up in your head. If not, then you may sit up now if you read that he does so much more for the community from his millions in net worth.
Mr Beast
Mr Beast Net Worth 2024: Biography, Charity and Salary
Heard of MrBeast? The American YouTube sensation, philanthropist and entrepreneur. While he mints a ton of money himself, he doesn't keep it to himself. MrBeast, whose real name is Jimmy Donaldson, does a ton of YouTube philanthropy stunts. He gives out large sums of money away to friends, charities and the general public.
Can you Buy Flowers with EBT? Eligible and Non Eligible Items
Best Ways to Celebrate Independence Day at Home
Celebrating Independence Day at home can be a fun and meaningful way to commemorate the holiday. Explore the best ways to plan a festive and enjoyable celebration at home with Beem!



Get up to $1,000 for emergencies

Send Money, Pay Later™

Send money to anyone in the US

BFF - Better Financial Feed

Ger personalized financial insights

Credit Monitoring

Monitor and grow credit score

Cash back

Get up to 20% on everyday spends


Save up to 40% on car insurance

Job-Loss & Disability Protection

Get up to $1,000 for loss of income

Identity Theft Insurance

Insure up to $1 Million

Health Insurance

Coming Soon

File Taxes

File federal and state taxes at low cost

Tax Calculator

Quick estimate of your tax returns

Personal Loan

Get up to $1,000 for emergencies

High Yield Savings

Send money to anyone in the US

Save big on auto insurance - compare quotes now!

Zip Code:
Zip Code: