The four steps
- List every asset at today’s value. Cash and savings, investments, retirement accounts at the current balance, the home at today’s market value (not what you paid), the car at resale value, and anything else with real resale value.
- List every debt at the payoff balance. Mortgage, student loans, auto loans, credit card balances (even ones you pay monthly), personal loans, medical debt, buy-now-pay-later balances.
- Subtract. Assets minus liabilities. The sign can be negative — that just means the starting line, not a verdict.
- Re-post quarterly. Debts amortize, investments move, home values drift. One subtraction every three months is the whole maintenance schedule.
Worked example
Cash & savings$25,000
Investments (brokerage)$60,000
Retirement accounts$80,000
Home (market value)$450,000
Vehicle (resale)$20,000
Total assets$635,000
Mortgage (payoff)$380,000
Student loans$35,000
Auto loan$15,000
Credit cards$5,000
Total liabilities$435,000
Net worth$200,000
Debt sits at 68.5% of assets here ($435,000 ÷ $635,000) — the mortgage is doing most of the pulling. As it amortizes, the ratio falls and the net worth line climbs even if the home value never moves.
What counts, and what doesn’t
- Counts: retirement accounts at the current balance, HSA balances, home equity (value minus mortgage), the car at resale value.
- Doesn’t: your salary (future income is not an asset), the original loan amounts (use payoff balances), sentimental value, anything you merely hope to inherit.
- Gray area: 529 college savings are assets earmarked for a purpose — include them, but know they are spoken for.