Net Worth Formula
Net worth is calculated by subtracting liabilities from assets. Assets include cash, investments, real estate, and personal property. Liabilities include loans, credit card balances, and mortgages.
Why Assets Matter
Assets represent what you own and can convert into cash. When you subtract what you owe from the total value of your assets, you arrive at your net worth.
Common Mistakes
Many people confuse net worth with income or savings. Income is earnings over time, while net worth is a snapshot of your financial position. For a detailed explanation, visit Investopedia: Net Worth.
