Let’s Start Talking About Net Worth

A few months after graduating college, I entered the American workforce wide-eyed and full of wonder. I was receiving a steady paycheck and retirement benefits for the first time in my life, and I mused about the ability to live free of financial anxiety. Or so I thought. I was surprised to learn that earning a living doesn’t necessarily translate to a worry-free middle class existence. In fact, I discovered many of my peers spent a lot of time discussing how expensive life can be, why I should never have children, or oversharing their own financial snafus. It became very clear that everyone wasn’t thinking about debt, savings, and their financial health in a practical way. Knowing this, I took an honest look at my fiscal condition and resolved to educate myself on a few basic principles. My first order of business: eradicating debt.

Liabilities and Assets

After transitioning into the real world, I came to realize I had these…obligations–and for the sake of this post, we’ll call them liabilities. Like many graduates in America, I left university with more than a degree; I had accumulated student loans.* Although below the national average, my debt was no small sum. At to add insult to injury, I also financed a used car through my credit union shortly after arriving in Seattle.

So there I was. A fresh product of the higher education mold. Plopped down in a new city with repayment plans looming ahead. But like many of us with outstanding debts, my savings paled in comparison. In other words, I didn’t have very many assets. And no, not these assets. I’m talking about liquid cash, life savings, investments, etc. I had some money saved up at my local credit union, but that was about it.

Stacking my liabilities and assets side-by-side left me owing more than I had saved. It was through this dichotomy I discovered the simple, but profound concept of net worth. Keeping it elementary and effective, net worth is calculated as follows:

net worth = assets – liabilities

It didn’t take long for me to conclude I was worth nothing. Actually, I was worth less than nothing as the above equation yielded a negative value. If I was to scrape together every dollar I had, it wouldn’t be enough to tackle my debt. I didn’t own my life–I couldn’t afford it. Have you ever seen commercials of people walking down the sidewalk with animated dollar values suspended over their head? It was probably alluding to their net worth. And mine was red.

Understanding net worth may very well be the first step in shifting your thinking about personal finance. In doing so, you’ll manage your money in a way that works for you, not against you. A small amount of freedom goes a long way. We aren’t looking to become the next Dave Ramsey, but we are trying to buy our freedom, and subsequently our time and energy back from resource-suckers holding it hostage. In this example, my loans were undoubtedly that ball and chain. It was time to change my perspective.

A Shift in Thinking

After three years of working amongst middle class, tax-paying Americans, I came to understand the pervasive financial illiteracy of so many. Our education system is pumping out generations of citizens unprepared for financial decisions so many of us make. And unfortunately, the structure of our curriculum communicates this as par for the course. So shortly after arriving in Seattle, I started taking steps to adjust my own perception.

For as long as I can remember, I’ve associated large salaries with rich people. If you make a lot of money, then you must be rich. And to an extent this income-to-wealth correlation is true. The ultra-wealthy generally maintain a safe, comfortable, and many times lavish standard of living. The most impoverished Americans remain poor thanks to the ever-stable economic mobility in our country. However, I believe there is a large swath of the population with incredible potential to live prosperous lives free of many financial anxieties. Yet they are subjecting themselves to consumer traps, lifestyle inflation, and consequential financial servitude. No greater community could benefit in a shift of thinking than the American middle class.

This is where living below your means and crafting a rich life intersect.

Designing this will look different for everyone, but all of the results will come from an improved sense of financial literacy. Money is one of many resources in which we can leverage in achieving the goal of a “rich” life. What if you earn $95,000 annually and spend $85,000? Are you rich in the traditional sense? What about someone earning $50,000 a year, but only parting with $25,000? It’s hard to answer these questions without seeing value in net worth, as opposed to annual earning. We need to start talking about net worth in our discussions of financial literacy.

Let’s Talk Numbers

To help illustrate this point, let’s get to know Sorry Sam and Happy Haley. They both graduated from a small university in California a few years ago. Both Sam and Haley are settled into a routine, enjoying their new lives, and making the most of their twenties. Thanks to Sam’s networking skills and charisma, he landed a consulting job in Chicago making $95,000. Haley studied economics and works at a small accounting firm outside her hometown Portland, Oregon. She enjoys being back near family and makes $50,000 annually. So who’s wealthier? Let’s take a look.

Sorry Sam loves his ties and Happy Haley can’t get enough of those blue dresses. One of them has their financial lives in order.


After three years of work, Sam got a couple promotions and moved to a nicer part of the city. He purchased a new car in celebration, but intelligently puts some cash away in his 401(k) every week. He rents an apartment downtown and will eventually pay off those pesky student loans and credit cards.

Assets | $39k

  • $8k | Savings
  • $13k | 401(k)
  • $18k | Car, Furniture, Possessions

Liabilities | $43k

  • $25k | Student Loan
  • $15k | Car Loan
  • $3k | Credit Card

Sam’s Net Work = Assets – Liabilities = $39k$43k = ($3k)

Sam certainly seems to have it all. Nice car, great apartment, and even making strides in his retirement game. But the student and auto loan really rain on his parade. This leaves him with a negative net worth of ($3k). Perhaps there’s more to financial health than a high salary after all?


Let’s see how Haley fairs. After three years of work, Haley got a couple promotions as well. She celebrated with a long weekend in Vancouver and invested the rest in her Roth IRA. She’s enrolled in a lack-luster retirement plan, but understands the value in contributing as much as possible while young. Haley shares an apartment with a friend within walking distance of their favorite karaoke bar. She is almost done paying off her student loans.

Assets | $23k

  • $5.5k | Savings
  • $9k | 401(k)
  • $4.5k | Roth IRA
  • $4k | Furniture, Possessions

Liabilities | $8k

  • $8k | Student Loan

Haley’s Net Work = Assets – Liabilities = $23k$8k = $15k

Unlike Sam, Haley prioritized living with a roommate and spending her money on experiences. She still owns a car and commutes to work, but she bought it used from her older sister Hannah and limits its use on the weekends. If she continues this strategy, her loans should be paid off in no time. Her assets and liabilities leave her with a net worth of $15k. Once her loans are paid off, she plans on saving up for her first adventure to South America.

So we’re back to the question of who’s richer? By now, I hope you see merit in asking another questions. How about: who’s making strides to grow their net worth? Much like my own experience of the working world, we often confuse one’s salary or toys for wealth. It’s very easy believe that high compensation directly translates to overall wealth. Challenging this notion is not only counter-cultural, but a difficult subject for those choosing another path.

To be fair, calculating net worth is a great starting point, but it’s not the whole picture. For example, having a mortgage will undoubtedly skew your net worth negative. Furthermore, taking out a loan to start a business may put you in the red. There’s a large spectrum of liabilities–some with higher return potential than others. A group of people can have an identical net worth, but the quality of their assets and liabilities should also be taken into account.

For this article, I’m focusing particularly on the inhibiting obligations of student loans, auto loans, or consumer credit card debt. These are unhealthy liabilities in which you should strategically eliminate. Understanding net worth and working towards the elimination of debts will also provide a couple more healthy shifts in your thinking about money.

Know Your Net Worth

If you’re anything like me, I’m guessing you have a couple life goals: skydiving in New Zealand, having a family, or taking a few months away from work for example. Thanks to the seemingly endless supply of credit and debt in America, these ventures can be financed in a couple of ways: outright or with a promise. We no longer need $25,000 in hand to own a car. Nor do we sign $100,000 checks for a four-year degree. Some of us can, but many of us don’t. Furthermore, all of our basic expenses can be purchased on a credit card.

You may have used credit to help advance yourself through a variety of life stages such as higher education or the purchase of a car. However, that choice doesn’t need to own your life. You can accept debt as a drudgery of contemporary life, or you can make strides towards buying back your time. Envisioning debts as restrictions and assets as welcomed warriors will help you in this journey. Pretty soon, you’ll start to see debts as a challenge to be tackled. You’ll connect your pay-off strategy with the long-term goal of ____________. The good news is that you get to fill in the blank.

As you begin your financial journey, tracking your net worth can be inspirational. Whether a dollar paid towards a loan or a dollar saved for retirement, they both make a positive impact in your net worth value. Regardless of where you place your cash, your overall wealth will grow! And that’s something to talk about. Take the next few minutes to tally up your assets and liabilities. Calculate your net worth. From here on out, make it a priority to grow this number and your freedom.

You have better things to do than pay off debt.

*For a broader perspective, watch student loan debt increase in real time.

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