Net Worth: What It Is and Why It Matters Story

Net worth is a term commonly thrown around in personal finance circles. However, unless you’re well-versed in finance topics it’s likely you don’t pay much attention to your net worth and you may not even know what it is.

In fact, you may associate it with the holdings of the rich and famous more than everyday people. While many are more likely to use income as a measure of financial status, it is really a persons’ net worth that paints a more complete picture of their finances.

What is Your Net Worth?

Simply put, your net worth is the sum of all your assets minus your liabilities.

Think of assets as things with value that you possess such as retirement accounts, real estate, savings/checking accounts, and even vehicles and other material possessions if they have value.

A very simple example would be an individual with $10,000 in their savings account who owes $2,000 on their credit card. In this case, you would take the $10,000 (asset) minus $2,000 (liability) for a net worth of $8,000. In this case it is positive.

Why Does Net Worth Matter? In the example above we discussed a hypothetical scenario where an individual had a negative net worth of – $8,000. At this point you’re probably thinking that person is in pretty bad shape, or at least not the best financial shape.

Swipe Up To  Read More

Swipe Up To  Read More

For More Posts Like This Visit

For More Posts Like This Visit

Money Saved Is Money Earned!