What Is Net Worth?
Your net worth is the total figure calculated after accounting for your total financial assets and total financial liabilities.
That means adding tangible assets like your home and investment portfolio and subtracting from your total assets figure to account for all of your debts, like a mortgage or credit card debt.
The number left after adding up your assets and subtracting your debts is, in essence, your net worth. It’s also your total cash value available if you sold your assets and possessions and used the cash to pay down your remaining debts.
There’s certainly no guarantee that your total net worth figure will wind up in positive territory. If your liabilities outweigh your assets, your total net worth figure would be a negative one – and a signal that you’ve got some work to do to put your financial house in order.
Ideally, you should update your net worth figure at least once a year, which gives you a benchmark figure you can use to evaluate your current financial situation against future financial needs.