Net Worth

Definition:

A calculation measuring someone’s total wealth, accounting for all assets, as well as any debts and liabilities.

Example:

The family’s net worth increased from a rise in the value of their retirement portfolio.

More Information:

Net worth is widely considered to be the most accurate measure of someone’s wealth. It takes into account not only the value of all your assets, but offsets that by the value of any outstanding liabilities.

If you own a million-dollar home that is fully mortgaged and borrowed against, does that make you wealthy? No. If everything you own if funded by debt, technically, you don’t own it – the bank does until you pay off your debts. Net worth reflects this.

To calculate net worth: