What Is Net Worth? And Why Paying Off Debt Counts
You can earn £100,000 a year and be broke. You can earn £45,000 and be quietly building wealth. Income tells you what flows in; it says nothing about what sticks. The number that tells the truth is net worth, and it is simpler than it sounds.
Net worth is everything you own minus everything you owe. That is the whole definition. No jargon, no spreadsheet wizardry required, and calculating yours takes about fifteen minutes.
How to calculate yours in 15 minutes
Step 1: List what you own (your assets). Current account and savings balances, your pension pot, any investments, your car's rough sale value, and if you own your home, its rough value. Rough is fine. This is a photograph, not an audit.
Step 2: List what you owe (your liabilities). Credit card balances, loans, car finance, overdrafts, and if you own your home, the mortgage balance. Anything you would have to pay back.
Step 3: Subtract. Own minus owe. That is your net worth.
As a worked example, meet Emma. She owns: £800 in her current account, £2,400 in savings, a car worth roughly £6,500, and a pension pot of £14,000. Total assets: £23,700. She owes: £1,900 on a credit card and £4,300 on the car finance. Total liabilities: £6,200.
Emma's net worth: £23,700 minus £6,200 = £17,500.
No single account shows Emma that number. Her banking app shows £800 and feels tight. Her pension statement shows £14,000 and feels irrelevant. Only the combined number shows what is actually true: she is £17,500 ahead, and now she can watch that number move.
Why paying off debt counts as getting richer
Here is the part that changes how people feel about their money. The next month, Emma pays £250 off her credit card and puts £100 into savings. She "only saved £100", so it feels like a slow month.
But look at the number. Her debts fell by £250 and her assets rose by £100, so her net worth went up by £350, to £17,850. Paying off debt raises your net worth pound for pound, exactly like saving does, because owing £250 less and owning £250 more are the same distance travelled.
This is why net worth is such a kind number for anyone paying down debt. Month after month of payments can feel like running to stand still, because the savings account never grows. Net worth shows the truth: every payment was progress the whole time. It is also why "should I save or pay off debt?" matters less than people fear. From net worth's point of view, both move you the same direction (though it is still worth keeping a small emergency fund first, so a surprise bill does not go straight back on the card).
Twelve numbers a year
You do not need to watch net worth daily. Checking money obsessively burns people out; never checking is how five years disappear. The habit that works is once a month, same day each month: update the balances, write down the number. Twelve numbers a year, as we covered in our seven money habits.
Two things to expect, so they do not rattle you:
- It will dip some months. Cars lose value, markets wobble, Decembers happen. A dip in a rising line is noise. The trend across six or twelve months is the signal.
- A negative net worth is normal at the start. If you are early in your working life with a student loan and a car on finance, owing more than you own is common. It is not a verdict; it is a starting line. The number exists so you can watch it climb.
A few honest notes for UK readers: your pension counts, it is yours even though you cannot touch it yet. Your home counts as its value minus the mortgage. Student loans are the odd one out, since repayment works more like a graduate tax and many are eventually written off; plenty of people track them separately or leave them out entirely. Pick one approach and stay consistent, because consistency is what makes the trend readable.
Watch the line, not the balance
Once you have twelve months of numbers, something changes. You stop asking "how much is in my account?" and start asking "which direction is my line going?", and that is a much better question. It is the difference between a bank balance, which describes this week, and wealth, which describes your life.
Our Net Worth Tracker does the whole job in Google Sheets: list what you own and owe once, update the balances monthly, and it draws the line for you, with your growth over time and how your net worth is made up. No bank linking, it lives in your own Google account, and there is an optional AI money coach if you ever want a second opinion on the trend. It is also built into the All-in-One Budget Planner if you would rather track everything in one place.
Fifteen minutes this week gets you your first number. Next month gets you your first trend.
Figures in this post are worked examples for illustration, not financial advice.
Frequently asked questions
What counts as an asset when calculating net worth?+
Anything of real value you own: bank and savings balances, pension pots, investments, your car's rough sale value, and your home's value if you own one. Use rough, honest figures. Everyday possessions like furniture and clothes are usually left out because you would never sell them.
Should I include my pension in my net worth?+
Yes. Your pension is your money, even though you cannot access it yet, and for many people it is their largest asset after their home. Leaving it out understates your position and hides years of genuine progress.
What if my net worth is negative?+
That is common, especially early in your working life with a student loan or car finance, and it is not a verdict. Calculate it anyway, because every debt payment from here raises it, and watching a negative number climb towards zero is some of the best motivation there is.
How often should I calculate my net worth?+
Once a month is ideal. It is frequent enough to show a real trend within a year, and infrequent enough that normal wobbles, like car depreciation or market dips, do not rattle you. Pick the same day each month and write the number down.
Is paying off debt better than saving?+
From a net worth point of view they are equal: paying £250 off a debt and saving £250 both raise your net worth by £250. A sensible order for most people is a small emergency fund first, so surprises do not go back on the credit card, then a mix that suits your interest rates. That is a personal judgement rather than a rule.