How to Calculate Your Net Worth and Why It Matters | Pocket Byte #28

In this quick episode of The Wealth Effect, we break down the concept of net worth, not as a buzzword, but as your personal financial GPS. Too often, people confuse income with wealth. But real wealth is measured by what you keep, not just what you earn.

We’ll explore:

• What net worth truly is and why it matters
• The simple formula to calculate it (and why most people avoid it)
• How understanding your net worth can change your relationship with money
• Why tracking it over time is more important than any single number

Whether you're just starting out or already investing, knowing your net worth is your first step to building intentional, lasting wealth.

Episode Transcript

(00:00):
Welcome back to

(00:00):
The Wealth Effect.
I'm your host,
Green Moon.
Today, we're talking about something
incredibly simple, but powerful.
We're talking about
your net worth.
What is it?
How you
calculate it?
And why it's the most
important number?
You probably
don't know.
Let's fill
your pocket.
Let's start
with the basics.
Net worth is one of the simplest financial
concepts to understand, but it's actually

(00:23):
one of the
hardest to face.
Your net worth is the total value
of what you own minus what you owe.
That's it.
All your assets, investments, and property
minus all your debts and obligations.
The result, that number,
is your net worth.

(00:43):
But your net worth is
more than just a number.
It's a mirror.
It reflects how well your
financial decisions are working.
It cuts through your income,
lifestyle, and appearances.
You can make six figures a year and
still have a negative net worth.
You can live in a big house, drive a nice

(01:04):
car, wear designer clothes, and still owe
more than you
actually own.
And on the flip side, you can live simply,
earn modestly, invest consistently,
and build a powerful foundation
for your real wealth over time.
We live in a culture
obsessed with income.
We glorify the paycheck,

(01:24):
the raises, the title.
But here's what
no one tells you.
Income is only
part of the story.
Your net worth tells
you what you keep.
Not what you've earned,
but what's actually yours.
It reveals whether your money is working
for you or just passing through you.
So how do you actually
figure out your net worth?

(01:45):
You sit down and
make two lists.
What you own and
what you owe.
You look into your bank accounts, your
investments, your retirement funds,
your property, maybe even the value of
your car or a business if you own one.
Total it all up.
Then you look
at what you owe.
Credit cards, student loans, mortgages,
car loans, personal loans, and any other

(02:07):
outstanding debts.
And you subtract that, what
you own minus what you owe.
And here's the part
where people hesitate.
What if the number
is negative?
What if it's lower
than you expected?
What if it's too
painful to look at?
And that's okay.
The goal isn't
to feel shame.
The goal is
to face it.
You can't grow what

(02:29):
you can't measure.
You can't grow what
you won't measure.
And your net worth is the most honest
financial number you'll ever see.
It doesn't care about
your appearances.
It doesn't lie.
It's simply
a truth.
And that truth provides you a starting
point for every smart financial decision
you can make

(02:49):
going forward.
If you know your net worth,
you can track progress.
You can set goals.
You can identify where
money is slipping.
And most importantly,
you can start building.
Now let's talk about
why this matters.
It matters because financial
stress doesn't come from numbers.
It comes from
uncertainty.
From not knowing.

(03:10):
From feeling like you're working
hard but getting nowhere.
Calculating your net worth
gives you a benchmark.
A place to stand.
And from there,
you can build.
You can pay off
debt with purpose.
You can invest
with a plan.
You can stop chasing a paycheck and start
growing true financial independence.

(03:31):
Jim Brown once said,
It's not what you earn.
It's what you do
with what you earn.
And that's the
essence of net worth.
It doesn't matter how impressive your
income looks on paper if you're not
keeping any of it.
And as Ryan Holiday reminds
us, You measure what you value.

(03:51):
And what you
measure improves.
If you really want to grow your wealth,
you have to start by
looking at the scorecard
that matters.
And the true power of net worth
is that it gives you control.
Because when you know your
number, you can change it.
You can start shifting
how you manage your money.
How you think
about assets.

(04:11):
How you make
financial decisions.
You move from being reactive
to being intentional.
And over time, your net
worth won't just be a number.
It'll be a story
of ownership.
A story of you
building something.
So if you've never done it before,
it's a great time to start.
Sit down and calculate
your net worth.

(04:31):
It doesn't have
to be complicated.
You can write it over a notebook, a
spreadsheet, or one of many financial
tools out there.
But the point
is to start.
And not to compare.
Not to impress.
But to understand where you
are and where you want to go.
Because in the end, your wealth
isn't defined by your income.
It's defined by

(04:52):
your choices.
And your net worth is how
you track those choices.
It's how you turn
effort into equity.
It's how you measure
progress towards freedom.
And it's how you stop living on someone
else's script and start writing your own.
Thank you for
listening.
Until next time.