What is Net Worth? How do you calculate it?

Hello there!

Net Worth is the value of all the things that are positive, minus the amount of stuff that is causing debt, or liability.

To make a clear understanding, if you were to put it this way, Net worth would be the amount of cash you would have if you were to sell all of your personal belongings and pay off all the debt. Selling your personal belongings would be positive (+) cash, and paying off your debts would be negative (-) from the amount of money you have.

To calculate Net Worth, you would get the value of all the assets (valuables), and subtract it with the liabilities (things you own).

Equation:

Assets - Liabilities = Total Net Worth.

Lets give you a example of a positive net worth:

A person named Bob has many cars, houses, and expensive clothing., and already payed off all of the stuff All of those stuff would be a value of $1,000,000. He just bought himself a brand new Ferrari, but he is leasing the car, meaning that he owns the bank for the car. The car was worth $250,000.

In this case, you would get 1,000,000 and subtract it with 250,000.

1,000,000 - 250,000 = 750,000

Bob's Net worth would be $750,000

Lets give you a example of a Negative net worth:

Craig has a lot of expensive clothing, that would give him a total value of $75,000. He just brought himself a brand new Mercedes-Benz, that he is paying monthly for. The car would be $110,000.

In this case, you would do the same things when you calculate the Net worth, Assets - Liabilities.

75,000 - 110,000 = - 35,000

Craig's Net Worth would be - $35,000, meaning that he is in debt.

To calculate your net worth, add up the value of everything you own and subtract from that dollar amount everything you owe. In other words, your assets minus your liabilities equals your net worth.

Net Worth : the amount by which assets exceed liabilities.