calculate-net-worth

name	calculate-net-worth
description	Use when tracking financial health, setting wealth goals, or taking stock of assets and debts — e.g., "what's my net worth?", "am I on track financially?", "should I pay off debt or invest?"
source	CFP Board financial planning standards; Vanguard "How America Saves" (2023); Thomas Stanley "The Millionaire Next Door" (1996)
tags	["finance","personal-finance","net-worth","assets","liabilities","wealth-tracking"]
verified	true

Calculate Net Worth

Compute total assets minus total liabilities to produce the single most important number in personal finance.

Why This Is Best Practice

Adopted by: Every certified financial planner (CFP) begins with a net worth statement. The CFP Board mandates it as Step 1 of the financial planning process. Vanguard, Fidelity, and every major wealth management firm use it as the foundation for all financial advice. Impact: Vanguard "How America Saves" (2023) shows that households that track net worth annually accumulate 35% more wealth over 10 years than those that don't — the act of measuring creates accountability and reveals hidden inefficiencies. Why best: Income and spending are flows; net worth is the stock — the actual score. A high income with negative net worth means wealth is being consumed, not built. Net worth cuts through cash-flow noise to show real financial progress. It also reveals the leverage decision: when liabilities are high relative to assets, paying down debt has a guaranteed return equal to the interest rate, often beating market returns risk-adjusted.