A calculation of all assets owned minus all liabilities constitutes a measure of overall financial standing. This calculation includes tangible assets like real estate and investment portfolios, as well as less tangible assets such as intellectual property and business ownership stakes. Liabilities, conversely, encompass debts like mortgages, loans, and outstanding credit card balances. Understanding this calculation provides a snapshot of an individual’s financial position at a specific point in time.
For example, someone with $500,000 in assets and $100,000 in liabilities would have a net worth of $400,000. Another individual might have $2 million in assets but $1.5 million in liabilities, resulting in a net worth of $500,000. These examples illustrate how varying asset and liability combinations can lead to different net worth figures.