What it actually is
Your net worth is what you own minus what you owe. That is the whole definition. Add up the money in your accounts, the value of your flat and whatever you have invested, subtract the mortgage and the car loan, and what remains is your net worth.
Sources: Banco de España: household assets and debts · checked on .
The number can come out negative. Taking out a mortgage does not automatically make it negative: the home is also an asset. The result depends on what everything is worth and what you owe. Keeping dated figures helps you understand changes without judging the result in isolation.
The account balance shows money held in that account; a dated net worth estimate includes other assets and debts. Use both alongside transaction records when reviewing changes.
How to work it out
One subtraction and two lists. The first list is what you own. The second is what you owe. No formulas involved.
List 1: what you own
Current and savings accounts, cash, funds and shares, pensions, the market value of your home if you own it, a realistic resale value for the car, and money owed to you that you expect to collect. Keep uncertain valuations separate so you can see their effect.
For each one, write down today’s value, not what you paid. A car that cost £22,000 and would sell for £9,000 is worth £9,000 on this list.
List 2: what you owe
The outstanding capital on the mortgage —not the monthly payment, not the total with interest: what is left to repay— plus personal loans, deferred card balances, instalment plans and any money you have borrowed from someone.
The subtraction
List 1 total minus list 2 total. That is your estimated net worth today. Write it down with the date and choose when to review the lists again.
Two worked examples
With a mortgage
A fictional example: someone aged 34, four years into a mortgage:
What they own: £4,200 in the current account, £11,000 in savings, £18,500 in an index fund, £9,000 for the car and £205,000 for the flat. Total: £247,700.
What they owe: £168,400 of outstanding mortgage capital and £3,100 on a car loan. Total: £171,500.
Net worth: £76,200. A year ago it was £61,800, a rise of £14,400. The two totals alone do not explain that change: check contributions, changes in asset values and outstanding debts alongside the money that moved through the accounts.
Their current account holds £4,200, but that balance does not show their savings, investments or debts. Net worth answers a different question; neither figure alone describes every part of their position.
Renting
A second fictional example: someone aged 29 who rents and has no car. They hold £2,600 in the current account, £7,400 in savings and £6,200 in a fund. They owe £1,900 on a laptop bought in instalments. Net worth: £14,300.
Those figures, £76,200 and £14,300, describe different sets of assets and debts. One includes a home. The other includes a fund, whose value and redemption conditions affect when money is available. Neither total tells you how much cash can be used tomorrow.
You can compare each person’s figures over time. A rise from £9,100 to £14,300 is £5,200, but it is not necessarily £5,200 saved: investments can change value too. Distinguish new money set aside from valuation changes and debt repayments before drawing a conclusion.
Sources: CNMV: fund subscriptions and redemptions · checked on .
Net worth is not liquidity
This is the distinction between a useful number and a decorative one. Two people with identical net worth can be in opposite situations depending on where that net worth sits.
In the first example, £15,200 sits in current and savings accounts. The home, car and fund have different sale or withdrawal conditions. Check those conditions and upcoming payments separately; subtracting debts from all assets does not tell you the cash available for an unexpected bill.
It is worth writing a second number next to net worth: how much money you can actually access when you need it. Check any restrictions and payments already due. This is a different question from the value of everything you own.
An emergency reserve can cover essential spending while you deal with an unexpected event. Its size depends on your costs and circumstances; several months is a general reference, not an amount everyone must reach before making another decision.
Sources: Finanzas para Todos: emergency reserves · checked on .
Four common mistakes
1. Confusing the payment with the debt
The mortgage on list 2 is the outstanding capital, not the sum of every payment left. Adding future interest counts a cost you have not incurred yet and sinks the number for no reason.
2. Valuing things at what they cost
Cars, phones and furniture can lose value. Using their purchase price may overstate your current assets. Use a realistic resale estimate, and make clear if you leave smaller possessions out to keep the calculation manageable.
3. Treating possessions as available cash
A sofa, television or bike can have resale value even if you do not plan to sell it. For a conservative estimate, leave out values you cannot support or list them separately. Owning something is not the same as having its value available in cash.
4. Comparing it with someone else’s
Net worth reflects income, assets, debts and personal circumstances, including inheritance and household responsibilities. Comparing your own dated figures can be more useful than treating someone else’s total as a target.
How often to check it
A quarterly review is one possible routine. You can adjust it to major changes in your assets or debts. Short-term movements in a fund can affect the result, so record them without assuming that every change reflects your saving or spending.
If quarterly reviews suit you, choose four dates and keep the basis consistent. January, April, July and October are one option. Record the valuation date rather than choosing only the days when markets make the total look higher.
Keep earlier dated measurements so you can compare how assets and debts changed. The history provides context, although you still need transactions and valuation details to explain the movement between two totals.
If the figure drops, review what changed. It might reflect spending, a revised valuation or another event; a lower total alone does not identify the cause.
What to do with the number
First, check what you can access for an unexpected bill. An emergency fund can help you meet it without selling another asset in a hurry. Choose the reserve with your essential costs and circumstances in mind.
Second, look at the trend alongside your transactions. Growth can reflect saving or higher asset prices; a flat year can include saving offset by falling values. Review money coming in, money going out and changes in debts before deciding what needs attention.
Third, distinguish a projection from a result. Investments can rise or fall. The compound interest calculator illustrates a constant-return assumption; it does not predict what an investment will earn.
In Sumant you can record transactions and review account balances. Those records help you examine cash flows, but the app does not currently provide the asset-valuation and net-worth history screen described by this exercise. Keep your dated asset and debt lists separately.