Calculating net worth, a measure of an individual’s financial health, allows you to determine your worth by totaling all your assets and subtracting your liabilities. For instance, if you have $100,000 in assets (cash, investments, property) and $50,000 in liabilities (debt, loans), your net worth is $50,000.
Understanding your net worth is crucial for informed financial decisions. It helps you assess your financial progress, set goals, and plan for the future. Historically, calculating net worth has been an essential practice for individuals to manage their finances effectively.