Net worth is the total value of everything you own minus everything you owe. It provides a snapshot of your overall financial health.

Understanding the Formula

You calculate it using a simple equation:

{Assets}-{Liabilities}={Net\Worth}

Breaking Down the Components

Assets (What You Own)

• Cash in bank accounts
• Investment and retirement accounts
• Real estate (home value)
• Vehicles
• Valuable personal property (jewellery, artwork, etc.)

Liabilities (What You Owe)

• Mortgages
• Car loans
• Student loans
• Credit card debt
• Personal loans

Why It Matters

• Tracks Financial Progress: Shows whether your wealth is growing over time.
• Measures Financial Health: Provides a more complete picture than income alone.
• Aids loan approvals: Lenders use it to check your financial stability.

Types of Net Worth

• Positive Net Worth: Your assets are worth more than your debt.
• Negative Net Worth: Your total debt is larger than your assets.