Your net worth is the difference between what you own (assets like bank deposits, EPF/PPF, property, mutual funds, gold) and what you owe (home/auto loans, credit cards). Net Worth = Total Assets – Total Liabilities. Track it monthly to see real progress toward financial goals and adjust saving, investing, and debt decisions.
Why Net Worth Matters
Net worth is the single snapshot that shows your true financial position. Salaries, income, or returns can be misleading; only the assets minus liabilities number tells you if you’re moving forward. Banks, wealth managers, and even startup investors use a Net Worth Statement to assess creditworthiness and risk.
The Formula (With an India Lens)
Core formula:
Net Worth (₹) = Σ Assets (₹) – Σ Liabilities (₹)
Breakdowns that Indian investors should track:
- Liquid Net Worth = Financial assets you can access within 3–7 days (Savings A/c, FDs, liquid funds, overnight funds, listed equities/ETFs) minus short-term debt (credit card, personal loan).
- Core Net Worth = Liquid net worth + retirement assets (EPF, PPF, NPS Tier I) + long-term investments (equity/debt MFs, SGBs, bonds) – all liabilities.
- Excluding Primary Residence (X-Home): Some planners also view net worth excluding your primary home for a conservative wealth view.
Optional performance metric:
Net Worth CAGR over time:
CAGR=(Ending Net WorthBeginning Net Worth)1n−1\text{CAGR} = \left(\frac{\text{Ending Net Worth}}{\text{Beginning Net Worth}}\right)^{\tfrac{1}{n}} – 1
(Useful to judge multi-year progress, independent of market noise.)
What Counts as an Asset (and What Doesn’t)
Include (typical Indian categories)
- Cash & Bank: Savings/current balances, FDs, RDs.
- Retirement: EPF/VPF, PPF, NPS (use latest statement/passbook values).
- Market-Linked: Equity/debt mutual funds (as per CAS), direct equities/ETFs, SGBs, RBI bonds, high-quality corporate bonds.
- Property: Residential/commercial/plots (use conservative valuation; see below).
- Gold & Other: Jewellery (24K equivalent), coins, demat gold (SGB, ETFs).
- Alternates (if relevant): AIF/PMS units, unlisted shares (use prudent valuation), ESOPs/RSUs only if vested (after a tax haircut).
Exclude or treat cautiously
- Insurance: Term cover is not an asset; endowment/ULIP only count surrender value (net of exit loads/taxes).
- Future income/bonuses: Not assets.
- Pledged holdings: Include but clearly mark as encumbered.
- Vehicles: Depreciating—include at resale value, not purchase price.
How to Value Assets Conservatively
- Property: Consider 80–90% of realistic sale value after stamp duty/brokerage; use recent registered sales (circle rates are a guide, not gospel).
- Gold jewellery: Convert purity to 24K equivalent; exclude making charges.
- Mutual funds/equities: Use latest NAV/closing price; rely on Consolidated Account Statement (CAMS/KFin) for funds.
- EPF/PPF/NPS: Use passbook/statement balances; ignore future contributions.
What Counts as a Liability
- Home/auto/personal loans: Use outstanding principal (not loan sanction amount).
- Credit cards/BNPL: Include full current balance.
- Margin loans/pledged overdrafts: Include outstanding amount.
- Education loan, business loan, LAP: Include net outstanding.
Debt-to-Assets ratio helps risk-check:
Debt-to-Assets=Total LiabilitiesTotal Assets\text{Debt-to-Assets} = \frac{\text{Total Liabilities}}{\text{Total Assets}}
Aim to trend lower over time.
A Mini Example
Assets (₹): Savings 1.5L, FDs 3L, EPF 4L, Equity MFs 6L, Primary home (90% of 80L) 72L, Gold 3L → Total Assets = 90.5L
Liabilities (₹): Home loan 55L, Car loan 4L, Credit card 0.8L → Total Liabilities = 59.8L
Net Worth = 90.5L – 59.8L = 30.7L
Insight: A large home and loan dominate both sides; track Liquid Net Worth separately to ensure resilience.
How to Track Net Worth (Step-by-Step)
- Create your inventory
- Pull statements: bank, FDs, CAS for mutual funds, broker P/L, EPF/PPF/NPS passbooks, loan statements.
- List assets/liabilities with dates and sources.
- Pull statements: bank, FDs, CAS for mutual funds, broker P/L, EPF/PPF/NPS passbooks, loan statements.
- Standardise valuation
- Pick one rule for each asset class (e.g., “property at 85% of estimate”, “gold at 24K equivalent”).
- Apply it consistently month after month.
- Pick one rule for each asset class (e.g., “property at 85% of estimate”, “gold at 24K equivalent”).
- Build a tracker
- Use a spreadsheet with sheets for Assets, Liabilities, and a Summary.
- Add calculated fields: Net Worth, Debt-to-Assets, Liquid Net Worth, Net Worth CAGR.
- Use a spreadsheet with sheets for Assets, Liabilities, and a Summary.
- Set a cadence
- Monthly (recommended) or quarterly on a fixed date (e.g., 1st of month).
- Monthly (recommended) or quarterly on a fixed date (e.g., 1st of month).
- Interpret trends
- Rising net worth but rising debt? Check leverage risk.
- Flat net worth despite SIPs? Review asset allocation and costs.
- Lumpy spikes? Often property revaluations—separate liquid vs illiquid views.
- Rising net worth but rising debt? Check leverage risk.
- Automate where possible
- Use CAS for mutual funds, broker statements for equities, bank integrations (where available), and scheduled reminders.
- Use CAS for mutual funds, broker statements for equities, bank integrations (where available), and scheduled reminders.
Benchmarks & Goal-Setting (Heuristics, India-Focused)
These are broad ranges—adjust for city/COL, career volatility, and family goals:
| Age | Suggested Net Worth Range (× annual pre-tax income) |
| 30 | 0.5× – 1.5× |
| 40 | 2× – 4× |
| 50 | 4× – 7× |
| 60 | 8× – 12× |
How to use: Set a target multiple for each decade and back-solve your annual surplus (SIP + principal repayment) required to reach it.
Metrics Worth Watching
- Savings Rate (%) = Monthly Investable Surplus ÷ Net Take-Home.
- Debt Service Ratio (%) = Total EMIs ÷ Net Take-Home (try to stay < 40%).
- Liquid Net Worth Months = Liquid Net Worth ÷ Monthly Expenses (target 6–12 months).
- Asset Allocation Drift = Current vs target mix (e.g., 60/40). Rebalance if drift > ±5%.
Common Mistakes to Avoid
- Counting term insurance as an asset.
- Overstating property (use conservative numbers and subtract transaction costs mentally).
- Ignoring taxes/exit loads on ULIPs or debt funds when estimating sellable value.
- Not netting off credit card balances—they can wipe out liquid buffers.
- Tracking too frequently—daily moves create noise; stick to monthly/quarterly.
FAQs
1) Should I include my primary residence?
Yes, but also track Net Worth (X-Home) to avoid a false sense of liquidity.
2) Is net worth taxable?
No separate wealth tax currently applies in India (wealth tax was abolished from FY 2015–16). Taxes arise when you earn or realise gains, not from the balance-sheet snapshot.
3) How often should I update it?
Monthly is ideal; quarterly at minimum. Use the same day/time for consistency.
4) How do EPF and PPF fit in?
Include the current balance. Do not add future contributions.
5) What about RSUs/ESOPs?
Count vested shares at fair value (after a conservative tax haircut). Keep unvested as a separate watchlist item.
Key Takeaways
- Define it right: Net worth = assets – liabilities; track both core and liquid views.
- Standardise valuation: Conservative, consistent rules beat optimistic guesswork.
- Measure progress: Use monthly updates, watch debt ratios, and review asset allocation.
Act on insights: Raise surplus, rebalance, reduce high-cost debt, and protect your downside with an emergency fund.