The monetary value of an individual’s assets, minus their liabilities, represents their overall financial standing. This calculation considers all forms of owned property, including real estate, investments, and other valuable possessions. Debts, such as loans and mortgages, are subtracted from the total asset value to arrive at a final figure. This final figure provides a snapshot of an individual’s financial position at a specific point in time.
For example, if someone owns a house worth $500,000 and has $100,000 in investments, their total assets are $600,000. If they have a mortgage of $200,000 and other debts totaling $50,000, their liabilities amount to $250,000. Subtracting the liabilities from the assets results in a net worth of $350,000. Another example could be an entrepreneur who owns a business valued at $1 million but has business loans of $300,000. Considering other personal assets and liabilities, their overall net worth could vary significantly.