Your Net Worth Is the Score That Actually Matters

🧮 What net worth actually means🔗

🎯 The essential: Two people can earn identical salaries and have completely different financial positions. Net worth is the number that shows the difference.

One person has $200,000 in savings, no debt, and a growing share portfolio. The other has a nice car, a wardrobe full of stuff, and $40,000 in personal loans. Same income, wildly different net worths. Net worth is a snapshot of your real financial position at a point in time, not a measure of how much you earn or how busy your bank account looks.

➗ The formula🔗

One of the simplest formulas in personal finance:

Add up everything you own that has value, subtract everything you owe. It can be positive or negative, both are useful information. A negative net worth isn't a life sentence, it's a starting point.

💰 What counts as an asset🔗

An asset is anything you own that has monetary value. For most Australians in their 20s to 40s:

• Cash and savings: everyday account, savings account, term deposits, offset account balance. Use the actual balance.
• Superannuation: yes, it's an asset. Important caveat: for most Australians born after 1 July 1964, the preservation age is around 60, so it's yours, but it's locked. See how much super you should have for real benchmarks by age. More on why this matters below.
• Property: if you own a home or investment property, use the current market value, not what you paid, not what you hope it's worth.
• Shares, ETFs and managed funds: the current market value of your investment portfolio.
• Your car: use the realistic resale value today, not the purchase price. Cars depreciate fast.
• Other valuables: jewellery, art, or collectibles with genuine resale value. Don't inflate these.

📉 What counts as a liability🔗

A liability is any debt or financial obligation you owe. Common ones:

• Mortgage balance: the remaining principal, not the original loan amount.
• Investment property loans: same deal, the outstanding balance.
• Personal loans and car loans: the current outstanding balance.
• Credit card balances: what you currently owe, not your credit limit.
• HECS-HELP debt: this one catches people out. It's a real debt, indexed to CPI each year, that reduces your take-home pay through compulsory repayments once you earn above the threshold. Income-contingent doesn't mean it's not a debt. Find your balance through myGov.
• Buy Now Pay Later balances: Afterpay, Zip, whatever you're using. If you owe money on it, it's a liability, even though it doesn't feel like "real" debt. Our BNPL guide covers why that matters more than people assume.

📊 Worked example: Priya, age 32🔗

Priya is a project manager in Melbourne earning $95,000 a year. She owns a one-bedroom apartment and has been building a small share portfolio for two years.

🆚 Why net worth beats income as a progress measure🔗

Say two friends, Tom and Jess, both earn $110,000 a year, same industry, same five years in the workforce. Tom upgrades his car regularly, moves into a nicer apartment each lease renewal, and travels twice a year. He has $8,000 in savings and $34,000 in personal loans.

Jess drives a seven-year-old car, lives in a modest rental, and puts $1,500 a month into an ETF portfolio. She has $97,000 invested and no consumer debt. She isn't picking individual stocks, she's just following a simple passive investing approach, which is exactly the habit that quietly turns a savings rate into a real net worth over time.

Same income. Five years later, Jess's net worth is roughly $120,000 higher than Tom's, and the gap keeps widening as her investments compound. Income is a flow, net worth is the stock that flow builds, or doesn't, depending on what happens in between. The gap between what you earn and what you spend is the only thing that actually moves your net worth.

📈 Average net worth in Australia: how do you compare?🔗

A quick warning first: averages in wealth data are almost always misleading. The ABS's most recent detailed Survey of Income and Housing (2019-20, published May 2022) put mean household net worth at roughly $1.04 million, and median household net worth at $579,200.

The median is the more useful number, the midpoint, where half of Australian households sit above and half below. The mean is dragged upward by very wealthy households at the top, which is exactly why it's easy to feel behind when you shouldn't.

The distribution is also extremely uneven: the ABS found the top 20% of households hold 62.8% of total household wealth. The bottom 20% hold less than 1%.

The honest takeaway: these benchmarks are a direction to aim, not a score to beat. Your net worth at 30 isn't supposed to look like your net worth at 55. What matters is whether yours is moving in the right direction over time.

⚠️ Common mistakes when calculating net worth🔗

• Treating super as liquid wealth. It's real and it's yours, but for most Australians born after 1 July 1964 you can't touch it until around age 60. Know the difference between total and accessible net worth.
• Forgetting HECS-HELP. It feels invisible because it's deducted automatically, but the debt is real and can run to $30,000, $50,000 or more. Check myGov and include it.
• Overvaluing your car. Use what you'd actually get selling it today, checked against comparable listings, not what you paid or what it's insured for.
• Ignoring BNPL balances. Easy to forget because they're spread across multiple apps without a single monthly statement.
• Confusing income with wealth. A high salary doesn't automatically mean a high net worth. If you spend everything you earn, your net worth can stagnate regardless of income.

❓ Frequently asked questions🔗