Net worth is a key financial indicator that allows us to understand the real value of our material resources. It is not just a number on paper – it is a reflection of our financial situation that can help us make informed decisions about saving, investing and planning for the future. In this article, we explain what exactly net worth is, how to calculate it and why it is worth monitoring its changes.
What is net worth (a person’s net worth)?
Net worth is the difference between assets and liabilities. Assets are everything we own that has value, for example:
- cash, bank savings,
- stocks, bonds and other investments,
- real estate (apartments, houses, plots of land) for rent (on which we earn money),
- rental items, e.g. vehicles,
- shares in businesses can be difficult to value (it is worth choosing one criterion for business valuation and using only that),
- optionally: valuable items, such as jewelry or works of art (variable value and/or difficult to estimate). The same applies to our house/apartment in which we live – because it is a large source of costs (often unforeseen).
Liabilities (liabilities), on the other hand, are our debts and financial obligations, such as:
- mortgage loans,
- consumer loans,
- loans,
- credit card debt.
The formula for calculating net worth (value) is simple:
Net worth = Assets – Liabilities
Why is it worth calculating net worth?
Calculating your net worth can give you a complete picture of your financial situation. Here are some key reasons why it’s worth doing regularly:
- Financial awareness
Knowing your net worth can help you better understand where you are (financially). It can help you assess whether your actions – saving, spending, or investing – are leading to an increase in your wealth. - Financial planning
Your net worth is the starting point for creating long-term financial plans. It lets you know how much you can save, what investment opportunities you have, and how long it might take to pay off your debts. - Monitoring your progress
Calculating your net worth regularly can help you see whether your financial decisions are having a positive impact. If your net worth is increasing, it means you’re headed in the right direction. However, if it’s decreasing, it could be a sign that you should reevaluate your spending or financial strategies. - Securing your future
Knowing your net worth can help you better plan for retirement, buying property, or educating your children. It can also help you estimate how long you can survive on your current savings in the event of an unexpected event, such as losing your job.

What should not be included in calculating net worth?
When calculating net worth, it is worth exercising common sense and caution when adding certain categories of items to assets. Examples include the apartment in which we live, a car, household appliances or small everyday items. Why?
Firstly, most of these items lose value over time – a car depreciates every year, and electronic equipment quickly ages and loses its market appeal. What’s more, some of these things generate maintenance costs, such as insurance, fuel or repairs, which negatively affects our actual wealth.
Secondly, fragmenting assets into many small items can make maintaining a net worth statement time-consuming and difficult to update in the future. By focusing on real, significant assets – such as investment properties, savings, securities or funds – we can get a clearer and more useful picture of our financial situation. This will make it easier for us to track changes over time and make informed financial decisions.
And thirdly – after liquidating these things, we will be able to include the cash we have acquired in our net worth statement. In this way, we will be able to include them in our asset statement, taking into account their final value as a constant in our asset balance sheet. At the same time, we will avoid the tedious valuation of everyday items.

How to improve your net worth?
If you have calculated your net worth and noticed that it is low or negative, do not worry – there are many ways to improve it. Here are some practical steps:
- Reduce debt
Paying off debts, especially those with high interest rates, is one of the best ways to improve your net worth. - Build savings
Regularly putting aside even small amounts can significantly increase your assets over time. - Invest wisely
Consider investing in stocks, bonds, or even real estate. Remember, however, to always adjust your investment strategy to your risk level. - Avoid unnecessary expenses
Analyzing your household budget and eliminating unnecessary costs allows for better financial management. - Increase income
Seeking additional sources of income, such as freelance work, developing your own business, or renting out real estate, can speed up building wealth.
Summary of net worth considerations
Net worth is not only an indicator of our current financial situation, but also a tool that helps us plan for the future and make informed decisions. Regularly calculating and monitoring your net worth allows for better money management, debt reduction, and building financial stability. No matter where you are now, it’s worth starting to work on increasing your net worth today – small steps can lead to big changes in the future.
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