JagInsights › Glossary › Net worth
What is net worth?
Net worth is what you own minus what you owe. A worked example, and why the number can fall in a good month.
Net worth is the value of what you own minus the balances you owe. Own more than you owe, and it is positive. Owe more than you own, and it is negative. Negative is common at the start and is still a real number.
Worked example
Cash $1,200, savings $4,000, a car someone would pay $9,000 for: $14,200 owned. Credit cards $800, a student loan $18,000, a car loan $7,000: $25,800 owed. Net worth is $14,200 minus $25,800, which is −$11,600. Paying $400 extra on the card raises net worth by $400 even though the checking account looks smaller.
Why it matters
A budget shows the month. Net worth shows whether the months are adding up.
Questions people ask
Does my car count?
Yes, at what you could sell it for, not what you paid. The loan counts too, in full.
Should I include retirement accounts?
Yes. They are yours. Just remember you may not spend them this year.
Can net worth fall while I do everything right?
Yes. A market drop or a car that depreciates can lower it in a month you saved. Watch the direction over a year, not one Tuesday.
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