What is Net Worth?
Net Worth is all the stuff you have, less all the debt you owe.
Assets minus liabilities.
The number at the end of that formula (be it positive or negative) is your net worth.
If you have a home that is worth $350,000 and have a mortgage on the home of $300,000, the net worth of the home is $50,000 (minus the costs associated in selling the home). Most people would say they have a $350,000 home.
I would say you have a $50,000 home and a monthly payment for the balance.
Sample net worth statement of recent college graduate:
- Bank balances: $500
- Retirement savings: $0
- Appreciating illiquid assets (home, property, business): $0
- College diploma: $0
- Vehicle: $1,000
- Total Asset values: $1,500
- Student loans: $75,000
- Car loan: $5,000
- Credit cards: $5,000
- Total Liability values: $85,000
- $1,500 – $85,000 = ($83,500) – those parentheses mean negative.
Let’s Focus. What is your personal net worth?