The formula
Net worth = Assets − Liabilities. Assets include everything of financial value: cash and savings, investment accounts, pension value, property market value, vehicles, and other possessions. Liabilities include everything you owe: mortgage balance, car loans, student loans, credit card balances, personal loans. The difference is your net worth. It can be negative — many young people with student loans and no assets have a negative net worth, and that's entirely normal.
Net worth vs income: the crucial distinction
High income does not equal high net worth. A surgeon earning £300,000 per year who spends £280,000, has a £500,000 mortgage, and no investments may have a lower net worth than a teacher earning £40,000 who saves 20% consistently and owns property outright. This is why financial independence is measured by net worth and investment income, not salary. The path to financial security is growing assets while controlling liabilities — not maximising your pay cheque.
How to grow net worth over time
Net worth grows when you: earn more than you spend (income exceeds expenses); invest the surplus in appreciating assets; reduce liabilities by repaying debt; and allow compound growth on existing investments. The primary lever for most people is the savings rate — the fraction of income converted into net worth each month. A high savings rate early in life, even on a modest income, produces dramatically higher lifetime net worth than a high income with low savings.
"It's not about how much you make — it's about how much you keep and how hard you put it to work."
What this means for you
Calculate your net worth today using a simple spreadsheet. List every asset at current market value, list every debt, subtract. Then track it quarterly. The act of measuring net worth — rather than just looking at your bank balance — shifts your financial thinking from income to wealth. Most people who build genuine financial security do so through consistent saving and investing over long periods, not through a single high-income year or lucky investment.