Determining one’s net worth, particularly in a country like Canada, is a crucial financial literacy skill that empowers individuals to make informed decisions and plan for the future. Net worth represents the overall financial health of an individual or entity, calculated by subtracting total liabilities from the sum of all assets. For instance, if an individual owns assets worth $300,000 and has liabilities of $50,000, their net worth would be $250,000.
Understanding one’s net worth is essential for setting financial goals, managing debt, and planning for retirement. Historically, the concept of net worth has been used by individuals and financial institutions to assess creditworthiness and make lending decisions. It provides a snapshot of one’s financial standing and serves as a foundation for making sound financial choices.