What is Net Worth? How to Calculate Yours + Why it Matters
Net worth is one of those major financial terms that you hear about often, but many don’t have a clear understanding of what it is. Does it consist of savings? Income? What is net worth, really?
It’s one of my goals to make money as simple as possible, and net worth is one of those financial concepts you should have a firm grasp of. Whether you’re just getting started with tackling your finances or you’re a seasoned pro, you’ll end up using net worth often.
It’s a very handy tool to have on hand to get a quick idea of your finances. It doesn’t get into the nitty-gritty and sometimes doesn’t show the whole picture (more on that later). But, it’s useful to keep track of the basics while trying to reach a financial goal.
By now, you’re probably itching to know the lay of the land when it comes to what is net worth, so I’ll get on with the show! Below I’ll cover the basics of what net worth is and lead you through how you can calculate your own net worth.
What Does Net Worth Mean?
In financial terms, net worth is the difference between your assets and liabilities. This means that you take everything in your life that has financial value and subtract anything you are obligated to pay. Your resulting number would be your net worth.