What Is Net Worth?
Net worth is the dollar value of your assets minus the dollar value of your liabilities. Very simply, it is a snapshot of your financial status during a given time. Since personal net worth fluctuates as assets and liabilities change, it is important to use other tools when determining your financial health. For example, let’s say your net worth is –$5,000, you earn $100,000 annually, and your debt is solely a low-interest car loan. Conversely, you have a net worth of $5,000, earn $20,000 annually, and have children. Would you prefer the negative or positive net worth? We’re willing to bet you chose negative net worth. It’s important to realize negative net worth is not necessarily bad or an indication of financial trouble.