Calculating your net worth is an essential financial metric that provides a snapshot of your financial health. Net worth represents the total value of your assets minus your liabilities and is an indicator of your financial well-being, borrowing capacity, and overall financial strength. Understanding how to calculate your net worth is crucial for effective financial planning and decision-making.
To calculate your net worth, you need to identify and quantify your assets and liabilities. Assets are anything that has value, such as cash, investments, and property, while liabilities are debts and obligations that you owe, such as mortgages, loans, and credit card balances. Once you have a comprehensive list of your assets and liabilities, simply subtract the total of your liabilities from the total of your assets.