Definition of Net Worth

What does the term "net worth" mean? What is the definition of "net worth"?

For this dictionary entry, we will be using the term "net worth" to talk about an individual person's net worth. If we were talking about a company, then we would use the term "shareholder's equity".

Anyways, back to "net worth".

To figure out your net worth, simply perform this calculation:

Total Assets (Including Cash)

Minus

Total Liabilities (Mortgages, Loans, etc.)

=

Net Worth

Total assets would include the current value of your home, car, etc., as well as other assets such as stocks, bonds, cash, 401k money, vacation properties, etc.

Total liabilities would include things such as your mortgage, student loans, car loans, credit card debt, etc.

Subtract your total assets by your total liabilities and you are left with your net worth.

If your total liabilities are higher than your total assets, then you are said to have a "negative net worth".


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