What Does Net Worth Mean
Net worth is the total value of everything you own minus everything you owe. It is a snapshot of your financial position at a specific point in time. If your assets exceed your liabilities, your net worth is positive. If your debts are larger than your assets, your net worth is negative.
How to Calculate Net Worth
To calculate net worth, list all your assets, such as cash, investments, real estate, and retirement accounts. Then list all your liabilities, including mortgages, loans, and credit card balances. Subtract total liabilities from total assets. The result is your net worth.
Why Net Worth Matters
Net worth helps measure financial health more accurately than income alone. It shows how much wealth you have built over time and how exposed you are to financial risk. Tracking net worth can reveal progress toward long-term goals and guide decisions about saving, spending, and debt management. For more details, see the Investopedia definition of net worth.
