Net worth is the single best measure of your overall financial health. It is simply the total value of everything you own minus everything you owe. A positive net worth means your assets exceed your debts, while a negative net worth means you owe more than you own. Most people start with a negative net worth due to student loans or a mortgage, and build wealth over time through saving and debt repayment.

The asset-to-debt ratio provides additional context. A ratio of 2:1 means you own twice as much as you owe, which is generally considered a healthy position. As you pay down debt and grow your investments, this ratio should improve over time. Lenders and financial advisors often look at this ratio when evaluating your financial stability.

To increase your net worth, focus on two levers: grow your assets by saving and investing consistently, and reduce your liabilities by paying down debt. Even small monthly improvements compound significantly over years. Tracking your net worth regularly provides motivation and helps you spot trends, both positive and negative, in your financial life.