Net worth: your real scoreboard
Add up what you own, subtract what you owe, and get the one number that shows whether you're moving forward. Learn why a high income can hide a weak position.
Net worth
Everything you own that has a money value, minus everything you owe. Assets − debts = net worth. It can be negative, and for many people starting out it is. What matters most is which way it's moving.
Own 30,000 in total, owe 18,000: your net worth is 12,000.
The two lists
Assets (what you own)
Money in accounts and cash, investments, gold, property, a car, money someone reliably owes you. Count each at what you could sell it for today, not what you paid.
Debts (what you owe)
Loans, card balances, instalment plans, money borrowed from family, unpaid bills. Count the full amount still owed, not the monthly payment.
Check yourself
Asset or debt?
- Balance in a savings account
- What is still owed on a car loan
- The car itself, at today's resale price
- Money borrowed from a sister
- A few gold coins in a drawer
- A phone bought on a 12-month instalment plan: the remaining payments
Show the answer
Asset: Balance in a savings account, The car itself, at today's resale price, A few gold coins in a drawer
Debt: What is still owed on a car loan, Money borrowed from a sister, A phone bought on a 12-month instalment plan: the remaining payments
Omid's net worth
ASSETS
Bank accounts 2,500
Car (resale value today) 11,000
Investments 4,000
Total assets 17,500
DEBTS
Car loan remaining 9,000
Card balance 2,200
Owed to a friend 800
Total debts 12,000Net worth = 17,500 - 12,000 = 5,500Omid earns 5,000 a month. After years of work, everything he has kept adds up to about one month's pay.
Check yourself
Kaveh earns 8,000 a month, owns assets worth 40,000 and owes 55,000. Leila earns 3,500, owns 60,000 and owes 5,000. Who is wealthier?
- Kaveh, because his income is more than double
- Leila: her net worth is +55,000 and his is −15,000
- They can't be compared without knowing their spending
- Kaveh, because he controls more money each month
Show the answer
Leila: her net worth is +55,000 and his is −15,000
Right. Wealth is what's left after debts. Kaveh's income is high, but he owes more than he owns. Leila could stop working for a long while; he could not.
A bathtub
Income is the tap. Spending is the drain. Net worth is the water level. A powerful tap with a wide-open drain fills nothing. The gap from lesson 1 is simply tap minus drain, and net worth is every month's gap piled up. Where the analogy breaks: water doesn't change by itself, but assets do. A house or a share can rise or fall in price while the tap and drain stay the same.
Check yourself
Mina bought a 15,000 car entirely on a loan. On the day she bought it, her net worth did not move at all.
Show the answer
True
True, and it surprises people from both sides. She added a 15,000 asset and a 15,000 debt on the same day, and the two cancel: owning the car did not make her richer, and taking the loan did not make her poorer. What happens afterwards is the real story, because the car loses value while the loan charges interest. Buying things with debt changes how your life looks, not your scoreboard.
Work out yours
- List assets at today's sale price
Accounts, cash, investments, gold, property, vehicle. Be conservative where you're unsure.
- List every debt in full
Remaining balance, not the instalment. Include informal debts to family and friends.
- Subtract and write down the date
One line: date, assets, debts, net worth. That's your starting point, whatever the number is.
- Repeat every three to six months
More often just shows market noise. You're looking for the direction over time, not a daily score.
Check yourself
Negar's net worth rose 25% over a year. Where she lives, prices rose 40% in the same year. Her monthly spending rose in line with prices. What actually happened?
- In buying power she fell behind: it now covers fewer months of her life
- She is 25% wealthier, because that is exactly how much her net worth grew
- She is 65% wealthier, because her net worth and prices both went up
- Nothing can be said here without knowing what her income did
Show the answer
In buying power she fell behind: it now covers fewer months of her life
Yes. If it covered 10 months of spending before, it now covers about 9 (1.25 ÷ 1.40 ≈ 0.89). The number grew; what it can buy shrank.
Check yourself
What does each event do to net worth on the day it happens?
Show the answer
- Moving this month's 300 gap into savings → Up by 300
- Using 1,000 of savings to pay down a loan → No change: an asset and a debt fall together
- Buying a 900 TV on instalments → No change today, then down as the TV loses value
- Spending 400 of savings on a holiday → Down by 400
Lesson recap
- Net worth = assets at today's sale price − debts in full. Income is the tap; net worth is the water level.
- A high income with higher spending and debt can mean a low or negative net worth.
- Buying with debt doesn't raise net worth. A positive gap, kept, does.
- Track it every three to six months and watch the direction. When prices rise fast, measure it in months of your spending.