What is Net Worth?

Net worth is a way to see how much money someone has. It’s like counting all the things you own and all the money you owe, then finding out what’s left.

How to Calculate Net Worth

1. Add Up What You Own (Assets)

• This includes things like money in the bank, your house, your car, and other valuable things.

1. Subtract What You Owe (Liabilities)

• This includes things like loans, credit card debt, and other bills you have to pay.

Simple Example

Imagine you have:

• $100 in your piggy bank
• A bike worth $50

So, you own (assets): $100 + $50 = $150

But you owe (liabilities):

• $20 to your friend

Your net worth is: $150 (what you own) – $20 (what you owe) = $130

Why is Net Worth Important?

Net worth helps people know if they have more money than they owe. It’s a good way to see if you are doing well with your money.

• Positive Net Worth: This means you own more than you owe. For example, if you have $200 and owe $50, your net worth is $150.
• Negative Net Worth: This means you owe more than you own. For example, if you have $50 and owe $100, your net worth is -$50.

Conclusion

Net worth is a simple way to know how much money you really have after paying off what you owe. It’s like looking at the big picture of your money!