What Net Worth Actually Measures
Net worth is the difference between what you own and what you owe. It equals total assets minus total liabilities. Assets include cash, investments, real estate, and retirement accounts. Liabilities include mortgages, loans, and credit card balances.
Why It Is Not Just Cash on Hand
Net worth is not the money you have in your wallet or bank account right now. It includes illiquid assets like property and retirement savings. It also deducts debts that may take years to pay off.
How Timing and Valuation Affect Net Worth
Net worth can change with market values, interest rates, and debt payments. A home or stock portfolio may be worth more or less on any given day. For a detailed explanation of how assets and liabilities are calculated, see the Investopedia definition of net worth here.
