What is net worth?

Net worth is a simple way to measure your financial health. It’s the difference between what you own (your assets) and what you owe (your liabilities). In other words, net worth is calculated by subtracting your total debts from your total assets.

Why is net worth important?

Knowing your net worth helps you understand your financial position. It can show you if you’re on track to meet your financial goals, such as buying a home, saving for retirement, or paying off debt. It’s a useful snapshot of your overall financial situation.

How to calculate your net worth

To calculate your net worth, follow these steps:

1. List your assets: These are things you own that have value. Common assets include:
• Your home and any other property
• Savings and investment accounts (like kiwisaver)
• Vehicles
• Personal belongings (like jewellery or art)
2. List your liabilities: These are debts you owe. Common liabilities include:
• Mortgage on your home
• Personal loans
• Credit card debt
• Student loans
3. Subtract liabilities from assets: The formula is:

Example calculation

If you have $500,000 in assets (home, savings, car) and $200,000 in liabilities (mortgage, loans), your net worth would be:

$500,000 – $200,000 = $300,000

Tracking your net worth

Regularly tracking your net worth can help you see your financial progress over time. It can also highlight areas where you might need to make changes, like paying down debt or increasing savings.