Your net worth is the value of all your assets, minus all of your liabilities. While you shouldn’t let this number define your happiness, it’s important to know your net worth and track it over time. That way, you can tell how close you are to financial independence and how much progress you’re making on your financial journey.
What is net worth
Net worth is the total value of all of your assets—including cash, stocks, bonds, properties, the money you’re owed, etc.—minus all of your debts.
Net worth is used by banks and investment advisors to assess an individual’s creditworthiness and their sophistication as an investor. While the number can be an indication of how much someone knows about managing their money, it’s not an all-important number. And, it has nothing to do with taxes—except for inheritance tax (and, if someone is worried about your net worth for that reason, then you have bigger problems).
How to calculate net worth
It doesn’t take any complex math to figure out your net worth. All you do is add up the total value of your cash and all other assets, and then subtract all of your outstanding liabilities.
Here are some items that should be included in both your assets and liabilities:
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