What Is Net Worth
Net worth is the total value of everything a person owns minus everything they owe. It is a single number that shows a person’s overall financial position at a specific point in time.
How Net Worth Is Calculated
To calculate net worth, add up assets such as cash, investments, real estate, and retirement accounts. Then subtract all liabilities, including mortgages, loans, and credit card balances. The result is the person’s net worth.
Why Net Worth Matters
Net worth helps measure financial progress and stability. A growing net worth usually means a person is saving, investing, and reducing debt over time. It is used by lenders, advisors, and researchers to understand financial health.
What Affects Net Worth
Income, spending habits, debt levels, and investment returns all affect net worth. Major life events like buying a home, paying off loans, or receiving an inheritance can also change it. For more detail, see the Investopedia definition of net worth.
