How to calculate your Net Worth and why it matters?

What is net worth?

What exactly does it include? And

Why should you even care about calculating it?

If these questions sound familiar, you’re not alone. Many people feel overwhelmed or unsure when it comes to understanding their financial position. But knowing your net worth is one of the simplest and most powerful ways to get a clear picture of your financial health.

In this guide, you’ll learn how to calculate your net worth step-by-step, understand what assets and liabilities are included, and discover why this single number can be a game-changer for your financial future. Whether you’re just starting out, supporting a family, or looking to gain more control over your money, this article will help you take confident steps forward.

Understanding Net Worth

What Is Net Worth?

In simple words, net worth is the difference between what you own and what you owe. It’s a single number that shows your overall financial health.

Formula: Net Worth = Assets – Liabilities

• Assets are things that you own and can turn into money—like your house, bike, savings, or mutual funds.
• Liabilities are what you owe—like home loans, credit card bills, or unpaid EMIs.

Imagine a tuition teacher who owns a ₹5 lakh flat (fully paid), ₹1.5 lakh in savings, and a scooter worth ₹50,000. But she also has an outstanding ₹1 lakh personal loan. Her net worth would be:

₹7 lakh (assets) – ₹1 lakh (liabilities) = ₹6 lakh net worth

Why Should You Know Your Net Worth?

Many Indians say, “I earn well, so why bother?” But income is only part of the story. Net worth tells you the true picture of your financial strength.

It helps you:

• Set realistic money goals (like buying a home, starting a business, or retiring early).
• Track your progress over time—are you building wealth or falling into debt?
• Make smart financial decisions—like whether it’s the right time to invest or clear loans.

Even if you’re just starting your career, tracking your net worth early builds good money habits that compound over time.

How to Calculate Net Worth (with Examples)

Let’s take an example of a mobile repair shop owner:

Net Worth = ₹3,40,000 – ₹1,30,000 = ₹2,10,000

Many Indians forget to count things like gold, life insurance surrender value, or even old vehicles while calculating assets.

How to Improve Your Net Worth

What Does “Improving Net Worth” Mean?

Improving your net worth simply means increasing what you own and reducing what you owe. The goal is to grow that gap between assets and liabilities over time.

Even if your income isn’t very high, smart money decisions can gradually boost your net worth. It’s not about becoming a crorepati overnight—it’s about financial stability and freedom.

Why It Matters for Everyday Indians

Let’s say you’re a mechanic who earns ₹25,000 a month. If you save ₹3,000 consistently, clear your debts bit by bit, and invest in a fixed deposit or SIP, your net worth will grow steadily.

On the other hand, even someone earning ₹1 lakh a month but spending everything or taking loans for luxury gadgets can end up with a low or even negative net worth.

A positive net worth, even if small, gives you better chances at getting loans, credit cards, and even rental agreements.

How to Improve Your Net Worth (Step-by-Step)

1. Increase Assets

• Save more every month—even ₹500 counts.
• Invest wisely in instruments like mutual funds, PPF, or gold bonds.
• Buy things that appreciate in value, like land or equity—not depreciating items like gadgets.

2. Reduce Liabilities

• Pay off high-interest loans first—like credit cards or personal loans.
• Avoid unnecessary EMI purchases for non-essential items.
• Consider debt strategies like the snowball method (start with smallest loan) or avalanche method (start with highest interest loan).

Always compare interest rates before taking loans. Reducing even 1% interest on a ₹5 lakh home loan could save you thousands per year.

3. Track Regularly

• Use a simple Excel sheet or free app to track your assets and liabilities every 3–6 months.
• Celebrate small progress! Even an ₹10,000 increase in net worth is a sign of good habits.

Example: Tuition Teacher

Rita, a part-time tuition teacher in Pune, earns ₹15,000/month. She started with ₹1.5 lakh in student loan debt and only ₹20,000 in savings.

3 years later, after reducing expenses, saving ₹2,000/month, and starting a ₹500/month SIP:

• Her debt dropped to ₹40,000
• Savings and SIPs grew to ₹1.2 lakh
• Net worth: ₹1.2 lakh – ₹40,000 = ₹80,000
• That’s a jump of ₹60,000—without increasing her income.

Gold jewellery, if owned by the woman of the house, can be legally counted as part of her individual net worth—even if gifted during marriage.

What Does Negative Net Worth Mean and How to Fix It

What Is Negative Net Worth?

You have negative net worth when your liabilities are more than your assets. In simpler terms, you owe more than you own.

Imagine a delivery agent who owns a second-hand bike worth ₹30,000 and has ₹5,000 in savings. But he also has ₹70,000 in personal loans. 

His net worth is: (₹30,000 + ₹5,000) – ₹70,000 = –₹35,000

That’s negative net worth.

Why Does This Happen?

Negative net worth can happen due to:

• High debts (personal loans, credit card bills, EMIs)
• Low or no savings
• Sudden expenses (medical bills, job loss)
• Starting life with a student loan (common among young professionals)

It’s more common than you think—especially in your 20s or early 30s.

Many salaried Indians start with negative net worth because of education loans or buying a car on EMI right after college.

How to Fix Negative Net Worth

Step 1: Know Your Numbers

List all your assets and liabilities—no matter how small. Even your laptop or bike counts.

Step 2: Make a Debt Reduction Plan

Use one of these methods:

If you’re paying only the “minimum amount due” on your credit card, you’re barely touching the principal. Always try to pay the full bill.

Step 3: Avoid New Debt

• No new EMIs unless absolutely necessary
• Say no to “Buy Now, Pay Later” schemes unless you’ve planned for it
• Use cash or debit cards for regular purchases

Step 4: Increase Income, If Possible

• Take up side gigs—freelancing, tuitions, weekend work
• Sell unused items—old phone, bike, electronics
• Use cashback/rewards points smartly

Step 5: Start Small Savings

Even ₹500/month can build a habit. Once you clear some debt, channel that EMI amount into a savings or SIP plan.

Some debts like child support, income tax dues, and many education loans can’t be waived—even if you declare bankruptcy in India.

Net Worth for Small Business Owners and Self-Employed Indians

What Does Net Worth Mean in a Business Context?

In business, net worth is also called book value or owner’s equity. It shows the true value of your business after paying off all loans and liabilities.

Formula: Net Worth = Business Assets – Business Liabilities

This tells you whether your business is growing in value—or just surviving on borrowed money.

Why It Matters for Entrepreneurs

Let’s say you run a mobile repair shop or are a freelance graphic designer. Knowing your business net worth helps you:

• Apply for loans confidently (banks want to see healthy net worth)
• Understand if your business is profitable over time
• Separate your personal finances from business finances

Many small business owners in India mix personal and business money. This makes it hard to know their true financial health.

How to Calculate Net Worth for Your Business

Let’s take the example of Anil, who runs a small tailoring shop in Indore.

Business Net Worth = ₹1,50,000 – ₹90,000 = ₹60,000

This means if Anil were to close shop today and sell everything, he’d walk away with ₹60,000 after clearing all dues.

3 Tips for Business Owners

• Keep a simple balance sheet updated every quarter—even if it’s just on paper or Excel. This becomes your net worth tracker.
• For tax filing, separate books for personal and business accounts make audits, GST returns, and how to file GST returns online much easier.
• Don’t count customer orders or verbal deals as “assets” unless you’ve been paid or delivered. Only real, measurable value should go in your asset list.

Tracking Net Worth Over Time

What Does “Tracking Net Worth” Mean?

Tracking your net worth means checking how your assets and liabilities change over time. It’s like keeping a personal scorecard of your financial progress.

Just like you check your weight or fitness levels, tracking net worth helps you monitor your financial health—monthly, quarterly, or even yearly.

Why Is It Important?

Let’s say you’re a freelance web designer. You got a new laptop this year, cleared some debt, and started investing in mutual funds. If you don’t track your net worth, you might feel like “nothing much has changed.”

But when you actually write it down and compare—

• ₹50,000 less debt
• ₹30,000 more in investments
• ₹10,000 in emergency savings

That’s ₹90,000 of real progress!

Tracking gives you motivation and clarity on what’s working.

Tracking net worth is one of the top habits of financially successful people—no matter their income level.

How to Track Your Net Worth: Simple Method

You don’t need fancy apps or software. Just follow these steps:

Step 1: Make a List of Assets and Liabilities

• Assets: savings, FDs, gold, LIC surrender value, real estate, car, investments
• Liabilities: credit card dues, personal loans, car/home EMIs, outstanding bills

Step 2: Add and Subtract

Use the formula: Net Worth = Total Assets – Total Liabilities

Step 3: Repeat Every 3–6 Months

Note the number and track it over time in a simple table like this:

Even if your income doesn’t change much, your net worth will show how wise money choices make a difference.

Tips to Make Tracking Easier

Set a reminder on your phone every 3 months to update your net worth. Do it with your chai on a weekend—it hardly takes 20 minutes.

If you’re married, track combined net worth—but also know each partner’s individual numbers. It helps in planning future goals better.

What Is a Good Net Worth and How Much Should You Aim For?

What Does “Good Net Worth” Really Mean?

There’s no one-size-fits-all number. A good net worth depends on your age, location, lifestyle, income, and goals.

For example:

• A 25-year-old fresh MBA grad with ₹2 lakh in student loan and ₹50,000 in savings may be doing okay.
• A 45-year-old salaried professional in Bengaluru with two kids and zero savings is likely falling behind.

Think of net worth like your financial blood pressure. What’s “good” for one person may not be for another—but you still need to monitor it.

How Much Net Worth Should You Aim For?

Here’s a simple thumb rule based on Indian salary levels:

So, if you earn ₹6 lakh/year at age 40, aim for a net worth of at least ₹18 lakh.

High-Net-Worth Individuals (HNWIs) in India

In financial terms, a High-Net-Worth Individual (HNWI) is someone with more than ₹8.3 crore (approx. $1 million) in liquid assets (excluding primary residence).

These people get access to special investment products and private wealth management services.

You don’t need to be an HNWI to build wealth. Focus on consistency, discipline, and debt reduction—that’s what gets most people to financial freedom.

Your Net Worth Is Your Financial Mirror

Net worth is not about showing off. It’s your personal financial mirror, showing what you’ve built over time.

Even if you’re starting from negative or zero today, small steps like paying off one loan or starting a ₹500 SIP can grow your net worth steadily.

Stay patient, stay consistent—and check in with your numbers every few months.

Improving your net worth isn’t just about money. It often means better peace of mind, fewer arguments at home, and more confidence in the future.

Conclusion

No matter where you are right now—just starting your career, managing a small business, or dealing with debt—knowing your net worth for beginners is a powerful first step. It’s not about being rich overnight. It’s about being aware, in control, and confident about your money.

You’ve now learned how to calculate net worth in India, how to improve it, and how to avoid common pitfalls. That’s already more than what most people know. And the best part? You don’t need a finance degree to grow wealth—just consistency, small actions, and a little patience.

Remember, you’re not alone. Many Indians are walking the same path—asking the same questions, facing similar struggles, and building their net worth slowly but surely.

So take that first step today. List your assets and liabilities. Start tracking. Set one small financial goal.

This is your money. Your future. And you’re ready for it.

Frequently Asked Questions (FAQs)

What is net worth, and why should I care?

Net worth is what you own (like savings, gold, house) minus what you owe (like loans, credit card dues).

It tells you if you’re financially healthy.

Even if your salary is good, you could still have a low net worth if you have too much debt.

Tracking it helps you make smarter money decisions.

I just started working. Is it too early to think about net worth?

Not at all!

Starting early helps you build good habits—like saving, avoiding debt, and investing.

Even small steps like saving ₹500/month or avoiding unnecessary EMIs can grow your net worth over time.

Think of it like planting a money tree—the earlier you start, the more it grows.

Can I have a negative net worth even if I earn well?

Yes.

If your loans, EMIs, or credit card dues are more than your savings and assets, your net worth is negative.

For example, someone earning ₹70,000/month but with ₹10 lakh in loans and little savings may have negative net worth.

How do I calculate my net worth?

List everything you own with value—cash, gold, land, car, FDs.

Now list what you owe—loans, credit card bills, EMIs.

Subtract what you owe from what you own.

That’s your net worth.

Example: If your total assets are ₹6 lakh and loans are ₹2 lakh, your net worth is ₹4 lakh.

How often should I check my net worth?

Once every 3 to 6 months is enough.

It helps you see progress, like debt going down or savings going up.

You can use a simple notebook, Excel sheet, or free app to track it.

Do it on a weekend—it only takes 15–20 minutes.