Calculating Net Worth

Net worth is a measure of an individual's or organization's financial health. It is the difference between the total assets and total liabilities. Calculating net worth provides a snapshot of financial health at a specific point in time.

What are Assets?

Assets are things that you own that have value. Assets can include:

• Cash and cash equivalents (checking and savings accounts)
• Investments (stocks, bonds, mutual funds)
• Real estate (homes, land)
• Personal property (vehicles, jewelry, artwork)
• Retirement accounts (401k, IRA)

What are Liabilities?

Liabilities are what you owe to others. Liabilities can include:

• Mortgage(s)
• Student loans
• Credit card debt
• Auto loans
• Personal loans
• Other debts

How to Calculate Net Worth

To calculate net worth, subtract total liabilities from total assets:

Net Worth = Total Assets - Total Liabilities

If the result is positive, you have a positive net worth. If the result is negative, you have a negative net worth.

Why is Net Worth Important?

Understanding your net worth is an essential step in financial planning. It helps you see where you stand financially and helps you make informed decisions about saving, investing, and debt repayment. It also enables you to track your progress towards financial goals over time.

Graham Stephan on Net Worth

Graham Stephan, a popular financial YouTuber, emphasizes the importance of understanding and tracking net worth for financial success. He suggests regularly calculating net worth to monitor financial progress and make informed decisions towards achieving financial goals.