A measure of someone’s financial standing, calculated by subtracting liabilities from assets, provides a snapshot of their current economic position. This calculation encompasses all forms of owned property, including liquid assets like cash and investments, and tangible assets like real estate and personal belongings. Liabilities, conversely, represent outstanding debts and obligations, such as mortgages, loans, and credit card balances. The resulting difference offers a comprehensive view of an individual’s overall wealth.
For example, if someone owns a house worth $500,000, a car worth $20,000, and has $10,000 in savings, their total assets amount to $530,000. If they have a mortgage of $300,000 and a car loan of $5,000, their liabilities total $305,000. Their overall financial standing would be $225,000.