This term refers to the total accumulated value of an individual’s assets, minus their liabilities. Assets can include real estate, investments, businesses, and personal property. Liabilities represent outstanding debts like mortgages, loans, and credit card balances. Calculating this figure provides a snapshot of an individual’s financial standing at a specific point in time.
For example, a business owner might have significant assets in the form of company equity and real estate holdings. However, if they also carry substantial business debt, their overall value might be lower than someone with fewer assets but no debt. Another example is an artist who may have a valuable collection of their own artwork, but if they have outstanding student loans and credit card debt, their overall value would be affected.