What Is Net Worth
Net worth is the difference between what you own and what you owe. It equals total assets minus total liabilities. A positive number means assets exceed debts; a negative number means debts exceed assets.
True or False: Net Worth Is the Amount You Have, Plus the Amount You Owe
False. Net worth is not the sum of what you have and what you owe. It is what you have minus what you owe. Adding assets and liabilities together does not measure financial position; subtracting liabilities from assets does.
How to Calculate Net Worth
List all assets, such as cash, investments, real estate, and retirement accounts. Then list all liabilities, including loans, credit card balances, and mortgages. Subtract total liabilities from total assets. For more detail on how assets and liabilities are defined, see the Investopedia definition of net worth.
