By Priya

March 15, 2021


Show notes

🎙 Your net worth is the #1 financial metric to focus on if you want to build lasting wealth and live the life of your dreams. But how do you calculate it? It’s not super complicated, but it’s easy to get it wrong. Get in the habit of calculating your net worth often and tracking it monthly to see how it changes. I’m sure you’ve seen people sharing their net worth all over the internet, but what does it mean? 🤔

This episode discusses topics like:

  • The most important factor that determines whether you really have an asset or just an item;
  • Why your net worth is the #1 metric for measuring your progress and your financial success; and
  • Why money saved in the bank doesn't equal wealth.


Hello, friends! And welcome back to the Girl on FIRE podcast. 

My name is Priya, I’m a Chartered Accountant, an analyst and the creator of Paper Money Co. 

I’m also a fierce financial feminist and the host of this podcast.

I believe that when a woman is in control of her money, she’s in control of her life.

This week, we’re changing gears a little bit. We’re talking about the #1 financial metric you need to focus on if you want financial independence. 

I’m talking about your net worth and how to calculate it! 

Now, you might think net worth is something reserved for rich white men, but I promise you it isn’t and you’ll see why as we dig into this episode.

Because if you want financial independence — whether it’s FIRE or traditional retirement — you need to know what it is, what it means and how to calculate it the right way, which we’ll cover in this episode. 

So, if you’ve been listening for a while, you’ve probably heard my story of my own financial journey, I’ve shared it in a few episodes and it’s also on my website.

I actually shared it from a very personal angle in episode 10. I’m a pretty private person and that was difficult for me to do, but I keep sharing it because I think knowing my story will help you write your own.

So, the short version is this - I grew my net worth to 6-figures by my early 20s, about the time I was 23, and I’ve been growing it since then. 

Now to be clear, I don’t just mean that I saved $100,000. I did that, but your net worth is not the same thing as money in the bank, and you’ll learn why in this episode.

One of the ways I measure progress with my financial goals is by tracking and growing my net worth. 

It’s something I started doing years ago and I still do it every single month when I close out my budget

It’s something I started doing pretty early in my life thanks to what I was learning in my accounting and finance degree. 

But you’ll see people on the internet talking about their net worth as well. It’s a super important metric.

This weeks’ episode won’t be super long, which is good for me because I got super tired recording my 3-part budgeting deep dive series. 

But as always, bookmark this episode for future reference or head to my website for the transcript.

Okay, so what is your net worth and what does it mean?

What is your net worth?

Your net worth is a measure of your wealth. That’s all it is. I’m sure when you hear the term ‘net worth' you picture overly tanned men with Panama hats, white shirts and boat shoes — whatever the hell those are — on oversized yachts on the French Riviera. 

Which isn’t actually a wrong assumption to be honest — when we were travelling to Nice and Monaco, that’s exactly what we saw!

But your net worth is a measure of your wealth, and it’s not just for rich white men, it applies to everyone.

Now, to be clear, it’s not a measure of your worth as a person. Not by any means. 

It’s a financial metric, it’s used by people and companies to measure their wealth and it’s a number that we try to grow. 

How do I calculate net worth?

Now, it’s calculated by taking the total of what you own — which are your assets — and subtracting the total of what you owe — your liabilities.

Okay, so that’s the calculation: total assets minus total liabilities, and later on in this episode, we’ll go through what your assets and liabilities are.

Your net worth is a much more holistic picture of your wealth and financial health than just looking at your savings or just looking at your debt. 

Because the calculation takes both into account. A lot of the times, you’ll hear people talking about how much they’ve saved up. 

But what you save isn’t the same as your wealth. Because it doesn’t include your debts — how much you owe to other people.

Having $100,000 of savings is meaningless in terms of wealth if you have $100,000 of debt. It’s super important to remember that — wealth is more than just money in the bank. 

So, what your net worth shows is what your wealth would look like if you took your assets and used it to pay off all your debts. 

So, for example, let’s say you have $100,000 saved up and you have $30,000 of debt. Your net worth would then be $70,000.

Do you see how your net worth is taking both your savings and debt into account? If you just looked at your savings, you’d think your wealth was much higher. 

And that’s important to note, because you could have $100,000 saved up and in assets, but if your debt is also $100,000 or even higher, then that paints a very different picture of what your wealth looks like. 

In that case, your net worth would be $0 or even negative if your debts were higher than your savings.

By taking both assets and liabilities into the equation, your net worth shows that it doesn’t matter how much your savings are if you have an equally large or larger amount of debt.

Because wealth isn’t just assets and money in the bank. It’s your assets and savings but only after you consider how much you owe. 

Why does your net worth matter?

So, now that you know how to calculate your net worth, I want to take a minute to get super clear on why it’s so important. 

It’s one of the most important financial metrics that I want you to understand and focus on growing. 

And that’s because it’s a holistic picture of  your wealth instead of just looking at your assets or just looking at your debts.

You could have $1M in the bank and you would still have no wealth if you also have $1M in debt. 

When you’re just looking at assets and savings, you’re only looking at one side of the picture. 

Because what your net worth is telling you is this: if you used your assets to pay off your debts, how much would you have leftover?

That’s how we measure wealth. So, for me, I’ve never carried any debt apart from my student debt. 

I’ve never had any consumer debt like credit card debt and I don’t have a mortgage. 

Through a lot of hard work and sacrifices I paid off $30,000 of student debt at 23, which was 2 years after I graduated. 

At that time, I’d also grown my net worth to 6-figures. So, that means that my assets minus my student debt was in the 6-figures.

I didn’t just save $100,000, I saved $100,000 while also eliminating $30,000 of debt.

Now, my income wasn’t very high at that time. I was earning an average salary of $57,000. 

I’ve since focused on growing that metric and by the time I’m ready to retire, I want my net worth to hit 7-figures. We talked about this in episode 5.

And tracking my net worth is how I can see my wealth building up over time. That’s why I include a net worth calculation sheet in my Paycheck Budget workbook for every single month. 

If you want to check out my Paycheck Budget workbook, I’ll leave it linked in the show notes. 

How often should I calculate my net worth?

A common question I get is how often you should calculate your net worth. I recommend calculating it at least monthly. 

You could calculate it more often, especially if you’re making extra debt payments every week. 

Seeing your net worth increase little by little every week might be motivating for you.

At the very least, I’d say to calculate it at least every quarter.


So, in the next part of this episode, I want to take a closer look at the components of your net worth and define what they mean. 

Remember, you calculate your net worth by taking your total assets and subtracting your total liabilities. 

So, let’s start with assets. What are assets? An asset is anything that you own that can generate some sort of income. 

That second part is super important. An asset isn’t just anything that you own. It has to have enough value to be able to generate income for you.

And when I say income, that means you can sell it for income, or the asset itself generates income.

So, for example, if you have shares in Apple, that’s an asset. Because you can earn income either from dividends or when the value of the stock goes up. 

Real estate is also a very common asset but it does get a little complicated because so many people don’t own their homes outright, so we’ll get into it in a second. 

So, an asset is something that you own that you can make money from.

Now, to be clear, when we’re taking about generating income or making money from an asset, what it means is cash.

Can your asset be turned into cash, or can it generate cash for you?

Something that can’t bring in cash is not considered an asset, even though it’s something of value that you own. 

For example, my engagement and wedding rings — I don’t consider that to be an asset.

My rings are rose gold with diamonds and pink emeralds. Those are precious gems, so it’s a valuable item.

But I have no plans whatsoever to sell my wedding ring. Which means that it’s never going to generate income for me. 

Even if the price of diamonds goes up, my ring is not for sale so it has no cash-generating value. 

That’s super important — if your item cannot put cold, hard cash in your pocket then it’s not an asset for the purposes of calculating your net worth.

Do you include your 401(k) / retirement accounts in your net worth?

And an asset can be anything — it can be something you create that you can sell like an ebook. 

Or it can be something that you generate income from like an investment property that you rent out to tenants. 

Your vehicles and cars can also be assets if you’re able to sell them and get some money for them.

If your car is a total bomb that won’t sell, then it’s not an asset. It has to be able to be turned into cash. 

An asset can be real estate, financial instruments like shares and bonds, vehicles, your own creations, art or even jewellery that you’re willing to sell.

Your retirement accounts are assets, so you should include the value of your 401(k) when calculating your net worth. 

Money in the bank is, of course, an asset — it’s already cash!

So, an asset is not just anything that you own, it’s something that you own that can put cash in your pocket. 

And that’s cash from selling the item, or if it generates it’s own income like when stocks return dividends, or when the asset appreciates in value.

This is a common mistake I see people on the internet make. They think an asset is anything of monetary value that you own. 

It’s not — if it’s not going to be bringing in cash, it’s not an asset. I’m going to say that again because it’s super important. 

If it’s not going to be bringing in cash, it’s not an asset. So, it has to be something of monetary value that you’re willing to sell or something that can generate income for you.

If it’s not going to be bringing in cash, it’s not an asset. So, it has to be something of monetary value that you’re willing to sell or something that can generate income for you.

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Now, when you’re calculating your net worth and taking a look at your assets, it’s important that you note down the correct value for them.

And to be clear, we’re talking about monetary value here. Not sentimental or emotional value. 

So, for things like cash and savings, it’s the money you have in the bank.

But for everything else, your asset value is not just the market value — it’s not just how much cash you can get for it or make from it. 

You need to take the market value and subtract any costs you’d have to pay to sell it or generate that income. 

So, for example, let’s say that your car is an asset. The market value of your car is $10,000. That means that if you sold your car today, it would be worth $10,000. 

If someone pays you fairly for it, they should be giving you $10,000. But let’s say you need to put an ad online to sell your car and it’s going to cost you $50. 

And you also have to file some transfer of ownership papers with the state and they charge you $450.

So, you sell your car for $10,000 but it cost you $500 to complete the sale, right? That means you made $9,500.

So, the value of your car as an asset is $9,500 because that’s how much cash you’ll bring in by selling it.

Assets in Priya’s net worth calculation

Now what about my assets? My assets are pretty simple. I have cash in the bank which includes my emergency fund and sinking funds. 

And I’ve also got my superannuation, for my listeners in the US, that’s my retirement account like your 401(K).

And then I’ve got my brokerage account. Those are my assets. I do own my car, but I choose not to include my car as an asset. 

You absolutely can, but it’s my personal choice not to include it. And that’s because I need my car. 

If I were to sell my car today, I would need that money to buy another car tomorrow. 

So, I’m not increasing my wealth by selling my car, I’m just swapping cars. So, that’s why I don’t include it as an asset. 

Not only that, but I’m not planning on selling my car. I love my little car and I plan to drive her until the wheels fall off. 

And at that point, the car won’t be worth anything. I won’t be able to sell her even if I wanted to. 

I’ve got other items of monetary value like my MacBook, my iPad, my iPhone and Apple Watch. I really like Apple, as you can tell. I also have other jewellery apart from my wedding and engagement rings. 

There’s also my wedding dress, actually. But I’m not planning on selling any of that stuff, so I don’t consider it an asset.

Because even though it has monetary value, I’m not able to make money from it because I’m not willing to sell it. 

And I really can’t stress this enough — an asset has to be something that can generate income. Otherwise, it’s not an asset, it’s just an item.

That’s a super important distinction I don’t see often on Instagram when people share their net worth. 

And to be honest, as a Chartered Accountant, which is the Australian equivalent to a CPA for my US listeners — it really pisses me off. 

I feel like throwing the accounting book at them!


Okay, so now, we’re going to look at liabilities. A liability is anything that you owe.

Now, we’re not talking about owing people favours or anything like that. We’re talking about owing money. 

And it’s not just the amount you borrowed, but in includes any interest that’s accrued on your borrowed amount.

So, your liabilities would be things like:

  • Credit card debt;
  • Student loans;
  • Car loans, so purchasing a car with finance;
  • Personal loans;
  • Payday loans;
  • If you use Buy Now, Pay Later services like AfterPay or Zip, that’s a liability. You walk away with your stuff while you still owe someone money.
  • Borrowing money from family and friends — to be clear, if it’s given to you as a gift then that’s fine, but if it’s expected that you’ll be paying it back, it’s a liability, even if they don’t charge you interest.
  • Medical debt is also a liability;
  • Any bills that you’re behind on; and
  • Your mortgage as well, which is often the biggest liability.

So, anytime you owe someone money, that’s a liability. Even if you go out to brunch with your friends and you owe someone — that’s a liability.

Real estate and other complicated issues

Now, I mentioned before that real estate can be a little more complicated. And that’s because most of the time, your real estate will form part of both your assets and your liabilities. 

So, if you own your home or any other properties outright with no mortgage, then you have an asset and no liabilities. 

But if you have a house and a mortgage, then you need to include the market value of your property as an asset, minus any taxes or selling costs like agent commissions.

Because that’s how much net income you can generate from this asset.

But on the other hand, you also have to list your mortgage and any interest due on it as a liability. Because that’s what you owe.

So, there are items where you can have an asset and a liability at the same time. 

Another example of this is if you were to borrow money to invest in the stock market.

Now, here’s another complication: what if you have a money pit? What happens if you have an asset that’s always breaking down or needing repairs. 

An item like that can make the distinction between an asset and a liability a bit fuzzy.

But to make it a bit easier, try another way of looking at your items. Overall, after all the costs to buy and maintain and repair something — is your item increasing your wealth or not?

Is it generating income for you or is it leading to more expenses? Is it appreciating in value or not?

So, for example, let’s say you purchase a house that’s a fixer-upper and in need of a good renovation. 

And you’re spending a lot of money to fix it up after buying it. There’s something really important that you need to consider here. 

Are the costs that you’re incurring going to result in an upgrade to your property? Meaning, will it increase the market value or increase the longevity of your asset?

If you’re throwing money at something and not getting return from it, then what you have is a money pit, not an asset. 

So, that’s something you need to consider. In all honesty, it’s not often that you won’t be able to increase the market value of real estate by fixing it up.

But when it comes to other assets, like cars, it’s a different story. Because cars lose their value very quickly. 

Now, cars are actually a great example of a true money pit.

From the moment you drive that car off the lot, it’s losing its’ value. And it’s going to keep losing value the older the car gets.

Whether you’ve got it sitting in a garage for years, or you’re driving it around everyday — your car is losing value.

And there may come a time when the cost of maintaining and servicing your car is more than what the car is actually worth. 

We see this a lot when it comes to car loans. That’s what it means to be upside down on your car loan — when your debt payments are more than what the car is actually worth.

Now, yes, there are exceptions here, for example, if you were restoring vintage cars, you’d probably be increasing the value of something that’s a bit of an antique. 

So, you really need to use your judgement in situations like this. There’s a great Tom Hanks movie called Money Pit, which I really love. 

Go check it out for a bit of extra credit. You can’t go wrong with Tom Hanks, I mean he made us cry over a volleyball. 

What does your net worth mean?

Okay, so now we’ve covered why your net worth is important and how to calculate it. 

If you can, I want you to pause this episode for a minute and calculate your net worth right now.   

Get notebook or journal, list out all your assets on one side and your liabilities on the other side. Do some Googling to figure out the value of assets if you need to. 

Now, when you take your total assets and subtract your total liabilities, you’ll have your net worth. 

And your net worth can fall into 3 buckets:

  • It can be $0 — which means you have no wealth. Your assets and your liabilities are equal. It means that by selling your assets to pay your debts, you’d be debt free but you’d have no assets. 
  • Or, it can be positive, which is where you want to be. It means that you own more than you owe. You could sell your assets to pay off your debts. You’d be debt free and you’d still have some assets left. 
  • Or, it can be negative, which is often the case when you have debt. It means that if you sold your assets to pay off your debt, you still wouldn’t be debt free. 

Now, don’t worry if your net worth is negative or $0. It’s just your starting point. But now that you have your net worth figure, what do you do with it?

What to do when your net worth is positive

So, if your net worth is positive, then congratulations! That’s where you want to be. It means that you own more than you owe.

Your goal now is to continue growing that number. And you’d do that by increasing your assets and decreasing your liabilities.

So, if you have debt, your net worth will increase over time as you pay down your debt. 

And it’ll also increase as you save and invest more. 

Now, I just want to make something clear here — when you have investments, especially in the stock market, it’s possible for your net worth to decrease. 

And that’s just because of the nature of investing in the market. It’s a cyclical beast, it goes up and down.

So, that means that your investments can lose value, sometimes, within a day. It doesn’t necessarily mean that you’re doing something wrong. But over the long term they increase. 

Just calculate your net worth monthly. Don’t worry about updating it on a daily basis. 

So, wherever you are on your financial journey, your goal is to get your net worth positive and to continue growing it.

Now, to be clear, having a positive net worth doesn’t mean you have no debt. My net worth is positive and I have no debt, but your net worth can still be positive if you have debt. 

A positive net worth just means that your assets — what you owe — is more than your liabilities.

What if I get a negative figure when calculating my net worth?

Now, what about if your net worth is $0 or negative? First of all, I want to make it clear once again, that this is not a reflection of your worth as a person, okay?

It’s a measure of your financial wealth. Who you are as a person can’t be measured in money. You’re made of stardust, not dollars and cents.

And I want that to be super clear because our old frenemy, Joe Internet, is out there online linking your financial worth to your worth as a person. 

Actually, it seems that Dave Ramsey is a Joe Internet. We talked about this in episode 9, he said that you had other problems if a stimulus payment was enough to change your life. 

Block out that noise. Some rich white men are just that. They have more wealth than humanity or compassion. And we don’t need to listen to them.

Block out that noise. Some rich white men are just that. They have more wealth than humanity or compassion. And we don’t need to listen to them.

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But what do you do when your net worth is $0 or if it’s negative? Your first goal is to make your net worth positive. 

How do you increase your net worth?

And, yes, $1 is positive. So, first, let’s get it positive and then you can focus on growing it. 

So, how do you make it positive? You need to increase your assets and pay down your debt. 

Now, when it comes to increasing your assets, focus on saving and investing. Get your emergency fund up and running. 

Use sinking funds to save for short term goals. Make contributions to your retirement accounts — that’s investing. 

For reducing your liabilities, focus on paying off your high interest debt first. And that's things like payday loans and credit cards.

Once you’ve got that under control, keep going with paying down your other debts. I’m going to do a whole episode talking about paying off debt. 

But for now, just know that if your net worth is negative, the only way to increase it is to increase your assets or pay down your debt.

I want you to calculate your net worth monthly to see how you’re progressing. It’ll take time but you’ll see your net worth increasing over time.

Small but consistent efforts pay off. 

Next weeks’ episode

And that’s all I have for you Girls on FIRE today!

My challenge for you this week is to calculate your net worth. Grab your notebook or journal, and follow the steps in this podcast to calculate it.

If you have my Paycheck Budget workbook, then there’s a dedicated worksheet for you to use every single month to calculate your net worth. 

So, I want you to do it and then I want you to see if your net worth is negative or positive. 

If it’s negative, then that’s okay. We all start somewhere. But it’s time to put together a plan to increase that metric.

On next weeks’ episode we’re talking about how to ask your boss for a raise.

Because you deserve to get paid what you’re worth and it’s time to close that gender pay gap, right?

And that’s what we’re going to do — one Girl on FIRE at a time.

It’s going to be super interesting so you’re definitely not going to want to miss it.

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