How to calculate your net worth

The Tuesday the two halves finally met

Nandini and Karthik are thirty-four and thirty-six. Both have salaried jobs. They have a daughter in nursery. Between them they hold two salary accounts, an old account from Karthik’s first job that nobody uses, a recurring deposit, four mutual-fund folios, gold from two weddings, a three-year-old car, and the flat they live in. Not one of those was forgotten. Every item had been checked, on its own, within the past month.

The trouble was that they always checked one item at a time. Open the fund app on a good day, and the household felt comfortable. Read a loan statement on a Tuesday, and it felt like they were far behind. Both feelings came from real numbers. Neither feeling used all of the numbers. So they did the thing they had avoided for four years. They drew two columns on one sheet of paper: what we own, and what we still owe.

Assets minus liabilities, nothing more than that

The formula is short: assets minus liabilities. The important work is making the two lists, not doing the subtraction. An asset goes in at what it is worth today, not at what you paid for it. The flat goes in at a current estimate, not its 2021 agreement value. The gold goes in at today’s rate, not the amount on a wedding bill.

Liabilities follow the same rule the other way. Write what is outstanding now, not what was originally sanctioned. This illustration uses rounded rupee figures. It ignores what selling anything would actually cost. Brokerage, stamp duty, exit loads, and capital-gains tax only arrive if you sell. A balance sheet is a measurement. It is not a sale.

• Assets: bank balances, deposits, mutual funds, shares, EPF and PPF, gold, property, vehicles, business interests
• Liabilities: outstanding home loan, vehicle loan, personal loan, education loan, credit-card balances
• Value every line on the same date, or the total describes a household that does not exist
• Round to the nearest thousand and move on, because precision to the rupee changes nothing here

The EMI is not the debt

Their first mistake took ten minutes to find. It was also the most useful one. Karthik’s instinct was to write the EMIs into the liabilities column: ₹38,400 for the flat, ₹14,200 for the car. Those were the numbers he thought about every month. An EMI is a monthly payment, not the debt itself. The debt is the principal still outstanding. The statement had it printed two lines lower.

Read properly, ₹28,10,000 remained on the flat and ₹3,40,000 on the car. Those are the figures that belong on a balance sheet. Interest that will accrue over the remaining years is not counted as a liability today. It has not been incurred yet. It also depends on how long the loan actually runs. The EMI still matters a lot. It simply answers a cash-flow question. That is a different tool for a different evening.

Whether the flat counts is a choice, not a fact

Then came the part they could debate. There is no single correct answer. Should the flat they live in appear as an asset? Nandini said obviously yes. It is the most valuable thing we own. Karthik said it cannot be, since they are never going to sell it and move into the car. Both positions are reasonable. This is a definition choice, not a matter of fact.

A total household net worth includes the primary home at a current estimate. An investable net worth leaves it out. The reason is simple: money you cannot spend without moving house is not money you can use. Which view you choose matters far less than choosing one and staying with it. A number whose definition moves between reviews cannot show you a trend.

What their two columns actually added up to

Valued on one date, the left column came to ₹71,80,000. The flat was ₹52,00,000. Mutual funds were ₹9,40,000. EPF was ₹6,20,000. Deposits and bank balances were ₹2,10,000. Gold was ₹1,60,000. The car was ₹4,50,000 after three years of use. The right column came to ₹31,90,000: ₹28,10,000 on the home loan, ₹3,40,000 on the car, and ₹40,000 still sitting on a credit card from a wedding trip.

Net worth was therefore about ₹39,90,000. That figure had never existed in their house before, in any app or any conversation. Rounded values, a single valuation date, no selling costs or taxes, and the flat included at a market estimate that nobody had paid a valuer to confirm.

Run the same evening as an investable net worth. Leave the flat out of the assets. Keep the home loan in the liabilities. The answer is roughly negative ₹4,60,000. Nothing was bought, sold, or repaid between those two sentences. Only the definition moved. That is the clearest reason to write your definition down before you read your number.

A loan payoff and a market rise are not the same event

By the second month they had noticed something this number does that no single app had. Net worth can rise in two different ways. It reports both the same way. The funds gain ₹1,00,000 in a good quarter, and net worth rises by ₹1,00,000. Prepay ₹1,00,000 of home-loan principal instead, and net worth also rises by ₹1,00,000. This time both columns shrink together.

The movement on the balance sheet looks identical. The decisions underneath are very different. One of them you can reverse next week. The other you cannot. Nothing here says which you should prefer. That depends on your loan’s interest rate, your tax position, how secure the income is, and how you would feel carrying debt through a bad year. What a balance sheet does is stop the two events being mixed up. That is more than most households have.

• An asset gaining value raises net worth and leaves the liability column untouched
• Repaying principal shrinks both columns at once and still raises net worth
• Interest and fees reduce cash without reducing debt, so net worth falls
• Borrowing to buy something adds to both columns, often leaving net worth roughly flat

A snapshot worth taking twelve times, not three hundred

The habit they settled on takes about fifteen minutes on the first Sunday of the month. Refresh the balances that move. Leave the flat’s estimate alone unless something real has changed in the neighbourhood. Read each loan statement for outstanding principal rather than EMI. Write the total into a running log with the date beside it.

The log does the work, not any single snapshot. Twelve entries show whether the liabilities column is shrinking faster than the assets column is growing. That is the actual story of a household carrying a home loan. Westro’s Net Worth Tracker holds both columns and recalculates the difference as values change. The arithmetic stops being a Sunday project. Your bank, loan, and fund statements remain the source of truth for balances and outstanding amounts. Property figures stay estimates. A net worth number is a measurement, not personalised advice.