Know the Number: Net worth is the value of all assets, minus the total of all liabilities. Or, put in plain speak, it’s what you own minus what you owe. “That gives you an immediate sense of whether the money coming in is being translated into wealth you can use later,” says Thakor. Tally up your assets first: How much do you have in your bank accounts? What’s the current balance on your retirement and investment portfolios? How much would your home fetch if you put it on the market tomorrow? Do you own anything else—a boat, a vacation home, a set of Fabergé eggs—worth including? Then tally up the things you owe, like your mortgage, student loans, credit card debts and auto loan. That first total minus the second equals your net worth.
What to Do Next: “You’re checking for two things with net worth: that it’s not negative and that it’s trending upward,” says Thakor. If you’ve never calculated your net worth before, think of this as your benchmark. Wealth doesn’t have to grow in a perfectly straight line—maybe one year the real estate market dips or your stock portfolio stumbles—but you want to do everything you can to nudge this number higher. Of course, if your salary and spending are in lock-step, your net worth can’t rise much. To get things growing, you can either get more money (land a giant windfall, command a pay raise, start a side hustle) or hold onto more of what you make (through savings or investing). Or—ideally—do both!