How this number is made
Net worth is assets minus debts. The useful version uses amounts you could defend: bank balances, investment statements, a sale price for the house that nearby sales support, and the payoff balances on loans. A monthly payment is not a debt balance.
- Cash is checking, savings, and the emergency fund. Do not list the same dollars twice.
- Home value is what a buyer might pay, not what you paid and not what you need it to be worth.
- Mortgage and other debts are today’s payoff quotes. A car you still owe on belongs as a value in “other” and as a balance in debts, or you leave both out.
Formula
Net worth = cash + investments + property + other assets − mortgage − other debts.
Worked example
Cash $8,000, investments $35,000, a home at $280,000, and $5,000 of other assets is $328,000. A $190,000 mortgage and $14,000 of other debt leave a net worth of $124,000. Home equity in that picture is $90,000.
Questions
Should I include my car?
Only at a price you could sell it for this month, and only if you also include the loan. A car that is worth about what you owe adds nothing. A car you pretend is worth the purchase price inflates the result.
Does a negative number mean I am ruined?
It means debts are larger than the assets you listed. Student loans and a new mortgage often do that for a while. The trend over a year matters more than one snapshot.