A net worth formula is a mathematical equation used to calculate the value of an individual’s or organization’s financial assets. It is typically expressed as the sum of all assets (e.g., cash, investments, property) minus all liabilities (e.g., debts, loans). For example, if an individual has $100,000 in assets and $50,000 in liabilities, their net worth would be $50,000.
Calculating net worth is important because it provides a snapshot of one’s financial health and can help individuals make informed decisions about their finances. It can also be used to track progress over time and compare oneself to others. Historically, the concept of net worth has been used to assess the financial stability of individuals and organizations for centuries.