When most people hear the term net worth, they picture billionaires, spreadsheets, or dramatic finance headlines. But here’s the truth: everyone has a net worth, and knowing yours isn’t just for the wealthy—it’s for anyone who wants a clear snapshot of their financial life.
Whether you’re 22 and figuring out how to budget, 42 and juggling mortgages and retirement goals, or 62 and rethinking what your “next chapter” looks like, understanding your net worth gives you something far more valuable than a number. It gives you a starting point.
In this guide, we’ll break down what net worth really means, how to calculate it, and most importantly—how to grow it at every stage of life, without needing to overhaul your lifestyle or win the lottery.
What Is Net Worth?
Your net worth is simply what you own minus what you owe. Think of it as your financial report card. It tells you, in one number, how you're doing in terms of building wealth. And unlike income, which is what you earn, net worth shows what you keep—what’s left over after the bills are paid and the debt is accounted for.
When you subtract your liabilities from your assets, the number you’re left with is your net worth. For example, if you own $100,000 in assets (like a retirement fund and a paid-off car) but owe $40,000 in student loans, your net worth would be $60,000.
What Makes Up Your Net Worth?
To fully understand how to grow your net worth, you need to know what goes into calculating it. Net worth is made up of two primary components:
What counts as assets?
Your assets are anything you own that has value. Here’s a closer look:
- Cash and checking/savings accounts
- Investments (401(k), IRA, brokerage accounts)
- Real estate or home equity
- Cars (at current market value)
- Businesses or intellectual property
- Valuable personal property (art, collectibles)
What counts as liabilities?
Your liabilities are any debts or financial obligations. Here’s a breakdown:
- Student loans
- Credit card balances
- Mortgage
- Auto loans
- Personal or business loans
- Medical or tax debt
The Importance of Growing Your Net Worth
Growing your net worth isn't about accumulating wealth for its own sake—it's about creating options and security for yourself and your loved ones. A steadily increasing net worth provides financial resilience against unexpected setbacks, opens doors to opportunities, and ultimately grants you greater freedom of choice in how you live. When your net worth grows, you gain:
- Financial security: A strong financial foundation helps you weather economic downturns, health emergencies, or career transitions without derailing your life.
- Peace of mind: There's profound psychological comfort in knowing you have resources to handle life's uncertainties.
- Expanded opportunities: A solid net worth may allow you to seize investment opportunities, change careers, start a business, or pursue education without financial strain.
- Future freedom: Building wealth today creates options for tomorrow, whether that's an earlier retirement, supporting causes you care about, or helping family members.
Most importantly, growing your net worth isn't reserved for a select few—it's achievable regardless of your current age or financial situation. The key is understanding that different life stages call for different strategies, and your approach should evolve as your life circumstances change.
Building Wealth in Your 20s and 30s
For many, your 20s and 30s are when you're laying the groundwork for your financial future. During these years, you’re likely balancing entry-level salaries, paying off student loans, and starting to invest. While it may feel overwhelming, time is on your side, and small, consistent steps can make a huge difference.
Focus on Net Worth Awareness
Most people in their 20s have low—or even negative—net worth thanks to student loans. That’s not a moral failing. It’s just math.
What matters is that you start paying attention. Set a reminder to check your net worth quarterly. Use a simple spreadsheet or a tool like Mint or Empower to track it. Just knowing your number is a powerful first step.
Prioritize Debt Repayment and Emergency Savings
Paying down high-interest debt (like credit cards) offers a double benefit: it reduces liabilities and frees up future cash flow. Aim to get rid of debt with interest rates over 7–8% before investing heavily elsewhere.
At the same time, build an emergency fund. Even $1,000 to start can keep you from relying on credit cards in a pinch.
Take Advantage of Employer Benefits
If your job offers a 401(k) or similar retirement plan with a matching contribution, don’t leave that free money on the table. Contributing even a small percentage of your paycheck to retirement accounts in your 20s and 30s can result in exponential growth thanks to compound interest.
Invest Early and Often
The earlier you start investing, the longer your money has to grow. Think of the stock market as a long-term play and prioritize low-cost index funds or ETFs to build wealth without unnecessary fees.
If you save $200 each month starting at age 25 and earn an average annual return of 7%, you’ll have over $240,000 by age 55. Starting just ten years later would leave you with half that amount.
Making Big Moves in Your 40s and 50s
Your 40s and 50s may bring higher earning potential, but they also come with increased responsibilities like a mortgage, college tuition for kids, or caring for aging parents. Here’s how to grow your net worth during these crucial decades:
Revisit Your Budget
Your spending habits may have evolved, so take time to reflect on where your money is going. Trim unnecessary expenses and redirect that money toward savings or investments.
Accelerate Debt Reduction
If you’re still carrying debt, now is a good time to double down on paying it off. That could mean refinancing your mortgage to lower your interest rate, or putting more toward credit cards or personal loans.
Maximize Retirement Contributions
This stage of life is ideal for increasing your contributions to retirement accounts. If you're 50 or older, take advantage of catch-up contributions to your 401(k) or IRA. These allow you to put extra money away, giving your retirement savings a final push.
Diversify Investments
Focus on diversifying your portfolio to include a healthy mix of stocks, bonds, and other assets. Reassess your risk tolerance as you get closer to retirement age.
Preserving and Growing Wealth in Your 60s and Beyond
Your 60s are often when you shift from building wealth to living off it. According to Federal Reserve data, the median net worth for Americans in their late 60s and early 70s is $266,400. This stage brings new questions about legacy, longevity, and living meaningfully.
Develop a Withdrawal Strategy
Building wealth is one thing; using it wisely is another. Work with a financial advisor to create a withdrawal strategy that balances your needs with the goal of ensuring your savings last throughout retirement.
Minimize Taxes
Strategic withdrawals from taxable, tax-deferred, or tax-free accounts can help you minimize tax liabilities. Speak with a tax professional to optimize your income strategies.
Downsize Thoughtfully
If maintaining a large home no longer makes practical or financial sense, consider downsizing. This can free up equity, lower maintenance costs, and even eliminate mortgage debt.
Protect Your Assets
Ensure your wealth is preserved by solidifying an estate plan, updating insurance policies, and reviewing beneficiaries. Long-term care insurance may also be worth considering to protect your finances from costly medical expenses.
Habits That Boost Net Worth at Any Age
No matter your life stage, some habits are universally beneficial when it comes to building net worth. Here’s a quick rundown:
- Track Your Progress: Regularly calculating and reviewing your net worth keeps you motivated. Free tools like Mint or Personal Capital make it simple.
- Invest in Yourself: Whether it’s advancing your career, learning a new skill, or starting a side hustle, investing in your earning potential can significantly increase your income over time.
- Stay Disciplined: Financial setbacks happen, but the key to success is staying consistent with your savings, investments, and long-term goals.
Final Thoughts
Growing your net worth isn’t about overnight success. It’s about making intentional financial decisions today that lead to significant gains tomorrow. By understanding what net worth is and tailoring your approach to your life stage, you can make meaningful progress regardless of where you begin.
Every step you take to increase savings, reduce debts, or invest in growth can have a lasting impact. Stay consistent, revisit your financial strategies regularly, and adopt a long-term mindset to track your progress and adjust as necessary. Your financial future is within your control; now is the time to shape it.
