Net worth is the total value of everything you own (assets) minus everything you owe (liabilities). It's a snapshot of your financial health at a specific point in time.
In Depth
To calculate your net worth, you add up the value of all your assets, such as cash, savings, investments, real estate, and cars. Then, you subtract all your liabilities, which include debts like mortgages, car loans, credit card balances, and student loans. A positive net worth means your assets are greater than your debts, while a negative net worth means you owe more than you own. Tracking your net worth over time can help you see your financial progress.
Example
If Sarah has $100,000 in savings and investments, a car worth $20,000, and a house with $250,000 in equity (total assets of $370,000), but also has a $150,000 mortgage and $10,000 in student loans (total liabilities of $160,000), her net worth is $210,000.