What Is Net Worth
Net worth is the difference between your total assets and total liabilities. It shows your financial position at a specific point in time. A positive net worth means assets exceed debts, while a negative net worth means liabilities are larger than assets.
What Are Liabilities
Liabilities are financial obligations you owe to others. Common examples include credit card balances, mortgages, auto loans, student loans, and unpaid taxes. They reduce your overall wealth and are subtracted from your assets when calculating net worth. Keeping liabilities low helps protect long-term financial stability.
How to Calculate Net Worth
To calculate net worth, list all your assets, such as cash, investments, property, and retirement accounts, then assign current market values. Next, list all liabilities, including outstanding loan balances and unpaid bills. Subtract total liabilities from total assets to get your net worth. Tracking this figure over time can reveal whether your financial position is improving or declining.
