What Net Worth Means
Net worth is the difference between your total assets and total liabilities. Actions that do not change this gap will not increase your net worth. For a simple explanation, see Investopedia’s definition of net worth.
Actions That Do Not Increase Net Worth
Taking on new debt to buy liabilities, spending savings on depreciating consumer goods, and moving money between accounts do not increase net worth. Increasing income alone also does not raise net worth if spending and debt rise by the same amount.
How to Actually Grow Net Worth
Focus on reducing liabilities, increasing assets, and avoiding unnecessary spending. Consistent saving, investing in appreciating assets, and paying down high interest debt are proven ways to build net worth over time.
