A measure of someone’s financial standing represents the total value of their assets minus their liabilities. Assets can include things like real estate, investments, and personal property, while liabilities are debts and obligations. Calculating this measure provides a snapshot of an individual’s financial health at a specific point in time. This calculation is often used to understand an individual’s overall financial position and potential for future investments or financial decisions.
For example, if someone owns a house worth $500,000, a car worth $20,000, and has $50,000 in investments, their total assets are $570,000. If they have a mortgage of $300,000 and student loans of $30,000, their total liabilities are $330,000. Subtracting the liabilities from the assets results in a measure of $240,000.