Definition
Net worth is the total value of all assets (what you own) minus all liabilities (what you owe). It is a comprehensive measure of financial health and represents what would remain if you sold everything you owned and paid off all your debts. Positive net worth indicates you own more than you owe, while negative net worth means debts exceed assets. Tracking net worth over time helps measure financial progress.
Formula
Assets include cash, investments, real estate, vehicles, and valuables. Liabilities include mortgages, loans, credit card balances, and other debts.
Example
Individual Net Worth Calculation
Assets: $50,000 in savings, $150,000 in retirement accounts, $300,000 home value, $20,000 vehicle value = $520,000 total assets. Liabilities: $240,000 mortgage, $15,000 student loans, $5,000 credit card debt = $260,000 total liabilities. Net Worth = $520,000 - $260,000 = $260,000.