Net worth — what it is and how to calculate it
Net worth is the difference between your assets and liabilities. Learn how to calculate it and why it's the most important indicator of financial health.
Definition
Net worth is the difference between the sum of all your assets (what you own) and the sum of all your liabilities (what you owe).
Net worth = Assets − Liabilities
Assets — what to include
- Cash in bank accounts
- Savings and deposits
- Investment portfolio (stocks, ETFs, bonds)
- Retirement accounts (IKE, IKZE, PPK)
- Cryptocurrencies
- Real estate (market value)
Liabilities — what to subtract
- Mortgage (remaining amount)
- Consumer and installment loans
- Credit card debt
- Private loans
Calculation example
| Element | Amount |
|---|---|
| Bank accounts | 20,000 PLN |
| Investments | 150,000 PLN |
| Apartment | 450,000 PLN |
| Mortgage | −300,000 PLN |
| Net worth | 320,000 PLN |
Why net worth is important?
- One indicator summarizing your entire financial situation
- Trend — rising net worth means you're building wealth
- FIRE foundation — without knowing your net worth, you can't calculate your Runway or time to financial independence
- Objectivity — you can't "cheat" this indicator
Negative net worth
Negative net worth (when liabilities exceed assets) is not uncommon — especially for people at the beginning of their careers with student loans or just after buying an apartment. It's not a reason to panic, but a signal to focus on paying off debts and building assets.
Tracking net worth in Freenance
Freenance automatically calculates and tracks your net worth based on imported bank accounts, investment portfolios, and entered liabilities. You see the trend on one chart.
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