Net Worth: Seeing the Forest Amid the Trees

December 19, 2019

Think about how many financial accounts you have. The answer might surprise you.

You probably have a checking or a savings account, maybe both. A credit card or two. A Venmo or PayPal account. Perhaps you have a PERA Defined Benefit (pension) account and are also saving extra dollars in a 401(k), 457, or both. Maybe you have a mortgage, car loan, or student loan account. Then there’s that old retirement account, an IRA, an FSA through work. The list goes on...

So far this scenario seems completely average, and we’re already well in double digits.

So how does it all fit together?

An easy way to think about your Money Universe

Let’s say you have a dozen accounts of one type or another. The only thing they all have in common…is you. You are the center of your money universe. You might be the only person in the world with your particular constellation of banks, cards, and accounts. Only you have the vantage point to see the full picture. But that picture can sometimes be fuzzy. It can feel like there’s too much to take in.

Calculating your net worth is one method people use to understand the relationship between those various accounts. Doing this is easier than it sounds. You can easily find net worth calculators online. They all have the same basic premise. List and add up all the accounts in which you have something, including physical things like a house, on one side. List and add up all the accounts in which you owe something on the other. The difference between the two sides is your net worth.

This number helps you see the big picture. It’s important to remember: There isn’t necessarily a single net worth number where you should be. Your number depends on factors such as your stage of life. Your net worth might be a negative number if you’re just starting a career and are paying off student loans. If you’re nearing the end of your career, have a house paid off, and have been saving for retirement for years, your number might be hundreds of thousands of dollars in the positive.

Your long-term goals play a big role in what number you’re aiming to reach. Someone who wants to retire with a vacation home and a boat will need a larger number to support that lifestyle than someone who plans a simpler lifestyle. Everyone’s story is different.

What to do with this info

So you know your number now. But you also know that your neighbor’s net worth number or goal might be different than yours. So what do you do with this information?

The trick lies in doing this math more than once. Recalculate it on a regular basis—once or twice a year is probably enough for most people. Because we all have different life stages and situations, everyone’s numbers are different. But, over time, everyone’s net worth ideally goes in the same direction during their working years: up. It goes up as we pay off debts and accumulate more savings and investments. That’s illustrated in the following chart, which shows that median net worth tends to grow as people age.


Median net worth

(half of people have more, have of people have less)

35 or younger












Data from a 2017 Federal Reserve study

If your net worth remains stagnant for a long time, perhaps you should focus on where you can save more. If your number is going down, perhaps you should take a look at your credit card accounts. Tracking your net worth won’t tell you what to do, but it can indicate if you should start taking a harder look at your finances.

Your net worth is a great way to quickly measure your financial situation. But it’s not the only measure, and it can’t tell you everything. For example, it doesn’t tell you how much you’re saving every month, which is a pretty important piece of info to know (we’ll deal with that, and other ways to track your financial health, in future stories). But it’s a quick and easy way to keep tabs on your money universe, and your place in it.