What Is Net Worth
Net worth is a financial measure that shows the value of everything you own minus everything you owe. It is calculated by subtracting total liabilities from total assets. A positive result means assets exceed debts, while a negative result means liabilities are larger.
How Liabilities Fit Into the Equation
Liabilities are financial obligations such as loans, credit card balances, mortgages, and unpaid bills. They represent claims against your assets and reduce your overall wealth. When you subtract liabilities from assets, the remainder is your net worth.
Why This Measure Matters
Tracking net worth helps you understand your financial position over time. It is used by individuals, advisors, and institutions to assess financial health and progress toward goals. For more on assets and liabilities, see the Investopedia definition of assets.
