Net Worth
Also known as: personal net worth, net assets
Net worth is what you own minus what you owe — the single number that measures financial position, as opposed to income, which only measures cash flow.
Net worth is calculated by adding up every asset — bank balances, mutual funds, stocks, EPF and PPF balances, property, gold — and subtracting every liability: home loan, car loan, personal loan, and outstanding credit card balances. The result can be positive or negative, and early in a career it is often negative, which is normal rather than alarming.
The reason net worth matters more than salary is that income says nothing about what you keep. Two people earning the same amount can be decades apart financially: one carrying a large home loan and a revolving card balance, the other with a paid-off position and an invested corpus. Only net worth captures the difference.
Tracked over time, net worth is the cleanest scoreboard available. A single month's figure means little; the direction and slope across quarters mean everything. It naturally rewards the two behaviours that actually build wealth — increasing assets and reducing liabilities — while ignoring how impressive the salary looks.
Include only what you could realistically convert or are genuinely liable for. Count the market value of property, not its purchase price, and count the outstanding loan balance, not the original amount. Leave out depreciating items you would never sell, and do not count an emergency fund twice by listing it both as savings and as a separate asset.