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How to calculate your net worth (and why it matters)

Money.ca / Money.ca

Cameron Smonk

By Cameron Smonk

🗓️

Updated: December 04, 2024

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Net worth has to be one of the most important personal statistics you can keep track of. It’s a measure of your true financial situation and provides insight into just how much wealth you have. Basically, it’s this equation: 

Your total assets (money, investments, property, etc.) - your total liabilities (credit card debt, loans, etc.) = your net worth

This number is essential for your financial planning, because managing your debt is almost always a more significant priority than adding to your savings. Tracking net worth over time also shows how on-track you are for long-term financial goals such as retirement.  

I’ll touch on this more below, but it’s important to remember that you need to take a complete account of your assets and liabilities. Assets include everything you own with significant, measurable value, such as your home, land you own and valuable collectables. Liabilities include all forms of debt, from credit cards and lines of credit to student loans and mortgages.

Here’s a step-by-step break down of how you can calculate your net worth:

  1. 1.

    Make a list of all your assets and all your liabilities – include all categories of assets from investments to real estate, and all liabilities from credit cards to car loans

  2. 2.

    Add up the value of your assets and the cost of your debt

  3. 3.

    Subtract the cost of your debt from the value of your assets – the number that remains is your net worth

Bonus: Complete this process with your household (including your partner’s or spouse’s assets and debt) to determine your household net worth as opposed to your individual net worth). 

Using a net-worth calculator can make this process easier – it helps you keep track of what assets you need to consider and what debts you don’t want to miss, and does the math for you.

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Net Worth Calculator

Your net worth is the value of all of your assets, minus the total of all of your liabilities. Put another way, it is what you own minus what you owe. If you owe more than you own, you have a negative net worth. If you own more than you owe you will have a positive net worth. This calculator helps you determine your net worth. It also estimates how your net worth could grow (or shrink!) over the next ten years.

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Information and interactive calculators are made available to you only as self-help tools for your independent use and are not intended to provide investment or tax advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.

Using the net worth calculator tool effectively

Since you’re on Money.ca already, why don’t you check out our Net Worth Calculator? It’s an easy-to-use tool that allows you to input all your various asset types (like the money in your savings account or the cottage you own) and compare them to your liabilities, in the form of various outstanding debts.

One really important feature is that you can use the calculator to compare your net worth to other Canadians at the same age and stage of life as you. This is by no means a “keeping up with the Jones’” metric – knowing where you’re at financially among your peers will help you measure your financial strategy and make any adjustments that are needed.

Other features you’ll appreciate are the customization options, which include adding unique assets or liabilities. Have a prized record collection that you consider an asset? Our calculator will allow you to weigh it against your liabilities so you have a clear and holistic view of your net worth.

And, as life is fluid and financial situations are prone to change, it’s best practice to periodically reopen the calculator and update it with your current assets and liabilities, so you have a clear (and current) idea of where you’re at.

Understanding your net worth by age

If you’re looking to get a baseline to determine if you’re on track for your net worth, a chart like this showing the median net worth by Canadian age group from Statistics Canada is a good place to start:

Comparing yourself to this can be useful – it can guide your future financial decisions and help you adjust course. But it’s not a be-all and end-all — everyone's financial journey is different, so don’t be too hard on yourself if you’re a little lower than the median.

As the above chart indicates, net worth tends to increase with time – until it doesn’t. After a certain age, most people start dipping into their retirement savings and don’t contribute to their investments as much — that puts a dent into their overall net worth.

Next steps to improve your net worth

Building your net worth can seem like a slow and tedious process, but through consistency (and the power of compound interest) it can be a rewarding process. First things first – make a budget and stick to it. Account for paying off high interest debt (that should be your priority) and then begin investing your money in a way that satisfies your risk tolerance.

Investment platforms such as Wealthsimple are a great place for beginner investors looking to avoid high-fee mutual funds to start investing in diverse opportunities, hedging risk effectively. Investing in a diverse mix of companies (and stocks, bonds, GICs, etc.) has historically proven the most effective way to grow your money. 

Related: How to buy stocks & How to buy bonds and the best GIC rates

Auto invest your pay with Wealthsimple

If you have a unique situation or just want personalized advice, don’t hesitate to reach out to a financial advisor. But before you do, check out our Net Worth Calculator, and get a feel for your progress on your financial journey.

How comfortable do you feel with your net worth? Are you behind, on target or well ahead? Let us know in the comments below.

FAQs

  • How do you calculate net worth?

    +

    To calculate net worth, simply take all the assets you have (money, property, investments, etc.) and subtract from them all the liabilities you have (credit card debt, loans, mortgages).

  • What’s the difference between individual and household net worth?

    +

    Your individual net worth is your assets, minus your liabilities. Your household net worth extends that calculation to everyone you live and share expenses with.

  • What net worth is considered rich in Canada?

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    If you have $1 million in liquid (easily accessible) assets in Canada, you are considered a high-net-worth individual.

  • What should my net worth be at 40?

    +

    Canadians between the ages of 35 to 44 have a median net worth of about $250,000, which is a good place to start for a reference.

Cameron Smonk Freelance Writer

Cam is a content marketer with a passion for saving, financial independence, and pulling off elaborate credit card point schemes. He has worked in Fintech and Finserve (specifically Group Retirement) and loves researching and writing about finance.

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