If you have ever wondered how to measure your overall financial health, net worth is the number you’re looking for. It is like taking a snapshot of your entire financial life—everything you own minus everything you owe.
Think of it this way: you might have a house, some savings, a car, and maybe even a few investments. But if you also have a home loan, credit card debt, or other financial obligations, those reduce your total wealth. Subtract the liabilities from the assets, and you’re left with your net worth.
Whether you're managing your household budget or running a business, knowing your net worth gives you clarity. It helps you understand where you stand today and how far you need to go to reach your financial goals. In this article, we’ll explain how net worth works, show you how to calculate it with a real-life example, and even explore how investing—like through mutual funds—can improve it over time.
Building your net worth starts with smart money decisions. Compare mutual fund options now and choose plans that align with your financial goals.
What is net worth?
Ever wondered what your financial position looks like on paper? That’s exactly what your net worth reveals. Simply put, net worth is the value you get when you subtract everything you owe (liabilities) from everything you own (assets). It’s a quick snapshot of your financial health and stability.
If your assets are greater than your liabilities, you have a positive net worth—a great sign that you’re managing your finances well. But if your debts outweigh your assets, your net worth turns negative, signalling that it may be time to revisit your financial strategy.
To put this in perspective, as of April 2024, Bernard Arnault—chairman of LVMH—tops the global net worth chart with a staggering $233 billion. On the corporate side, Microsoft leads as the world’s largest company by market capitalisation, valued at over $3.13 trillion.
Whether you're an individual or a business owner, understanding your net worth gives you clarity on where you stand financially and how far you need to go.
If you are aiming to shift from financial uncertainty to stability, it starts with better planning and disciplined investing. Explore top-performing mutual funds that align with your long-term financial aspirations.
Example of net worth
Let’s break down net worth with a simple, relatable example.
Meet Person A. He owns an apartment valued at Rs. 2.2 crore. He also has investments in mutual funds, fixed deposits, stocks, and bonds worth Rs. 50 lakh, plus Rs. 10 lakh in his savings account. These are his assets.
Now his liabilities: a home loan of Rs. 1.5 crore and debts amounting to Rs. 20 lakh.
To calculate his net worth:
Net Worth = Assets - Liabilities
= Rs. (2.2 crore + 50 lakh + 10 lakh) – Rs. (1.5 crore + 20 lakh)
= Rs. 1.1 crore
This means Person A has a positive net worth of Rs. 1.1 crore—indicating he owns more than he owes.
This simple equation helps individuals and businesses understand their true financial standing and make better-informed decisions.
Want to take the first step toward growing your assets? Start investing or SIP with just Rs. 100 and watch your wealth build over time.
How to calculate net worth?
Calculating your net worth isn’t complicated—it’s all about listing everything you own and subtracting what you owe. Here’s how you do it:
Step 1: List all your assets
Start by calculating all your liquid and non-liquid assets:
- Cash and bank account balances
- Investments (stocks, bonds, mutual funds, FDs)
- Real estate at current market value
- Valuables like jewellery, art, or collectibles
- Retirement savings, insurance policies, and provident funds
Avoid including assets like furniture or clothes since they don’t hold resale value in liquidation.
Step 2: Add up all your liabilities
Now total all the money you owe, including:
- Home, car, education, or personal loans
- Credit card balances
- Any outstanding bills or dues
Step 3: Subtract liabilities from assets
Use this formula:
Net Worth = Total Assets – Total Liabilities
Here’s what it means:
- Positive net worth: You own more than you owe.
- Zero net worth: You’ve just enough assets to cover your liabilities.
- Negative net worth: You owe more than you own—an urgent signal to reassess your financial habits.
Keeping track of your net worth regularly helps you monitor progress and adjust your savings and investment goals accordingly.
What is good net worth?
There is no one-size-fits-all answer when it comes to what a "good" net worth looks like. It really depends on your age, goals, income, and lifestyle.
If you are in your 20s or early 30s, just having a positive net worth—meaning your assets are more than your debts—is a great place to start. Many people at this stage are still paying off education loans or just beginning to save. In India, a net worth of Rs. 10–20 lakh in your 30s (through savings, early investments, or property) is considered quite healthy.
By your 40s or 50s, you might aim for a net worth of Rs. 50 lakh to Rs. 1 crore, depending on your income and how much you’ve invested or paid off in debt. You may have a paid-off home or a well-diversified investment portfolio with mutual funds, stocks, or real estate.
Financial experts often say that by retirement (say age 60), your net worth should be 6 to 10 times your annual income. So, if you make Rs. 10 lakh a year, having Rs. 60 lakh to Rs. 1 crore saved up helps you retire comfortably without financial stress. A good net worth is simply one that gives you stability, security, and freedom.
What is net worth for a business?
Just like with personal finances, net worth for a business is the difference between what the company owns and what it owes. It's also referred to as owner’s equity or shareholder’s equity in accounting terms.
Let’s take a simple example.
Imagine a company owns Rs. 50 lakh worth of assets—this includes things like cash in the bank, machinery, real estate, or inventory.
If the company also owes Rs. 30 lakh in loans or has accounts payable to vendors, then its net worth would be:
Business Net Worth = Rs. 50 lakh (Assets) – Rs. 30 lakh (Liabilities) = Rs. 20 lakh
This Rs. 20 lakh is what the business is worth after clearing its debts. A growing business will typically have a rising net worth, showing that it’s becoming more profitable and financially sound.
On the flip side, if liabilities are greater than assets, it signals a problem—possibly poor financial management, slow revenue growth, or high debt.
What is the net worth of an individual?
Your personal net worth is a financial mirror—it reflects how well you’re managing money. As we mentioned earlier, it’s calculated as:
Net Worth = Assets – Liabilities
Assets can include your savings, fixed deposits, mutual funds, stock investments, your home, car, and even things like gold or other valuable possessions.
Liabilities are any debts or obligations you’re yet to repay—credit card balances, car loans, personal loans, or EMIs on your home loan.
Tracking your net worth over time helps you see how you’re progressing. Are you building wealth steadily or accumulating debt? Are your assets growing faster than your liabilities? This big-picture perspective is useful whether you’re planning to buy a house, start a business, or retire early.
A positive net worth means you’re on the right path. A negative one doesn’t mean failure—it just means it’s time to reassess your money habits and focus on turning things around.
If you are looking to move your net worth in the right direction, consider starting with a habit as simple as a SIP. Start investing or SIP with just Rs. 100 and watch it grow through the power of compounding.
Why is net worth important?
Think of net worth as your personal financial report card. It tells you where you stand—not just in terms of how much you earn, but how well you manage your money over time.
If you want to plan for a future purchase, say a new home or car, knowing your net worth shows you whether you're ready or need to hold off. It also helps with long-term planning—like saving for retirement or building an emergency fund.
Banks and lenders look at your net worth when you apply for loans. A strong net worth improves your creditworthiness, making it easier to get approvals or negotiate better interest rates.
For businesses, it's even more crucial. A company's net worth reflects its financial health, and directly impacts how much it can borrow, how it’s valued by investors, and how resilient it is during tough times.
In short, tracking your net worth regularly helps you stay in control of your finances—both now and in the future.
What is negative net worth?
Negative net worth means one thing you owe more than you own. It happens when your total liabilities (debts) are higher than your total assets.
This might sound scary, but it's not uncommon. Many people experience negative net worth early in life—say, when you’ve just taken a home loan or are still paying off student loans. The key is to recognise the situation early and take steps to fix it.
Some signs of negative net worth include maxed-out credit cards, growing debt with little savings, or big-ticket loans you’ve yet to pay off. If this sounds familiar, it’s time to start budgeting, reduce unnecessary spending, and create a plan to pay down debts aggressively.
The good news? Net worth is not permanent. With the right financial habits, you can move from negative to positive by focusing on saving, investing, and reducing liabilities consistently over time.
How to use your net worth?
Once you know your net worth, what should you do with it?
Start by setting realistic goals. Whether it's buying a house, saving for retirement, or building a travel fund, your net worth gives you the baseline to measure progress.
Let’s say your net worth is Rs. 20 lakh today, but you want to grow it to Rs. 1 crore in 10 years. That goal gives you clarity—and helps you decide how much to save, where to invest, and what debts to clear.
Second, track your net worth regularly. This can help you identify patterns—maybe you’re saving more, or maybe your debts are growing faster than expected. Adjust your strategy accordingly.
And finally, your net worth helps you make better money decisions. For example, if your net worth is stagnating, it may be time to boost income or optimise your investments. Or, if your liabilities are growing, you might need to pause non-essential spending and prioritise debt repayment.
How can you increase your net worth?
Improving your net worth isn’t just about earning more—it’s about making smarter financial decisions. Whether you're building personal wealth or managing a business, the formula stays the same: increase assets and reduce liabilities.
Start by investing regularly. It could be through mutual funds, fixed deposits, or real estate—assets that can grow in value over time. Investing early and consistently lets you benefit from the power of compounding.
At the same time, look for ways to cut down on liabilities. If you’re juggling high-interest debts like credit cards or personal loans, prioritise repaying them. Reducing debt frees up more of your income for savings and investments.
Another smart move? Increase your income streams. Whether it’s through a side hustle, freelancing, or rental income, extra earnings give you more opportunities to save and invest.
If you are serious about growing your wealth, mutual funds offer a structured path to long-term asset creation through diversification and professional management. Explore top-performing mutual funds!
Finally, track your spending habits. Building net worth isn’t about sacrificing everything it’s about being intentional with your money. Small changes can have a big impact over time.
How to increase your net worth with mutual funds?
Mutual funds are one of the most accessible and effective tools for growing your net worth in India. They let you invest in a diversified portfolio managed by professionals, even if you’re starting small.
The key advantage of mutual funds is how they combine diversification and compounding. When you invest consistently—say, through a Systematic Investment Plan (SIP)—your money grows over time, and the returns start earning returns of their own.
Here’s a fact: the Indian mutual fund industry’s Assets Under Management (AUM) has grown more than 6x in the last decade, from Rs. 8.25 trillion in March 2014 to Rs. 53.40 trillion in March 2024. That’s a strong indicator of both popularity and potential.
Mutual funds also offer flexibility—you can choose equity funds for long-term growth, debt funds for stability, or hybrid funds for a balance of both. And with SIPs, you don’t need a huge lump sum to start—just a consistent investment habit.
If you want to boost your net worth over time, mutual funds are a smart, long-term play.
Conclusion
At its core, net worth is a simple formula: what you own minus what you owe. But this simple number can tell you a lot—about your financial stability, your progress toward goals, and where you need to improve.
Whether you’re starting out or planning your retirement, keeping track of your net worth helps you stay on top of your finances. And one of the most effective ways to grow it? Investing consistently—especially in mutual funds, which combine growth potential, flexibility, and professional management.
You don’t need to be wealthy to build wealth. Just start where you are, stay consistent, and make your money work for you.
Tracking your progress helps but it is the consistent, disciplined action that transforms your net worth over time. Begin SIPs from Rs. 100
The convenient and easy-to-use Bajaj Finserv Platform boasts over 1,000 mutual funds schemes. It also allows for easy mutual fund comparison and selection, making it an excellent resource to build positive net worth in the long term.
