Widows Well - Net Worth Definitions

Why do I need to know my net worth?

It is important to know your net worth because it is a snapshot of your financial life at one moment in time, which reveals your financial health. Tracking your net worth is a useful tool to measure your progress from year to year and will let you know if you’re living beyond your means and need a lifestyle change. Without positive net worth, you are heading down a path to many financial challenges. Also it shows you how much money you have to work with in your retirement years.

Net Worth

The complete financial value of a person is found by adding all assets and subtracting all liabilities, or debts.

Asset

Assets are everything you own that has any monetary value, plus any money you are owed.

They include money in bank accounts, stocks, bonds, mutual funds, equity in real estate, the value of your life insurance policy, and any personal property that people would pay to own.

Liability

In personal finance, liabilities are the amounts you owe to creditors, or the people and organizations that lend you money. Typical liabilities include your mortgage, car and educational loans, and credit card debt.

When you calculate your net worth, you subtract your liabilities, or what you owe, from your assets. The result is your net worth, or the cash value of what you own.