What Is Net Worth?
Learn how to calculate your net worth and why it gives a clearer picture of your financial position than income alone.
1. What is net worth?
Net worth is the total value of your assets minus the total value of your liabilities.
Assets are what you own. Liabilities are what you owe. Subtract the second from the first and you get a snapshot of your financial position at that moment.
2. Why net worth matters
Imagine two people each earn ₹1 lakh per month. One has ₹20 lakh of investments and almost no debt. The other has little savings and ₹15 lakh of loans. Their incomes are the same, but their financial positions are very different.
That is why net worth is useful: it measures what remains after debt, not just what flows into your bank account.
3. How to calculate your net worth
Step 1: list your assets using realistic current values. Step 2: list the amount still outstanding on every liability. Step 3: subtract total liabilities from total assets.
Use current values
If your car originally cost ₹8 lakh but could reasonably be sold today for ₹4 lakh, use roughly ₹4 lakh as the asset value — not the original purchase price.
Use outstanding debt
If you originally borrowed ₹20 lakh but only ₹12 lakh remains, your liability is the outstanding ₹12 lakh, not the original loan amount.
4. Positive, zero and negative net worth
If assets are greater than liabilities, net worth is positive. If they are equal, net worth is zero. If liabilities are greater, net worth is negative.
A negative net worth is not automatically a crisis. Someone early in their career with an education loan may start negative and improve steadily as income grows, debt falls and assets accumulate.
5. Quick check
Your total assets are ₹12 lakh and your total liabilities are ₹4 lakh. What is your net worth?
Answer: B — ₹12 lakh − ₹4 lakh = ₹8 lakh.