This term refers to the total accumulated value of an individual’s assets, minus their liabilities. Assets can include things like real estate, investments, and personal property. Liabilities, on the other hand, represent outstanding debts like mortgages, loans, and credit card balances. Calculating this figure provides a snapshot of a person’s financial standing at a specific point in time.
For example, if someone owns a home worth $500,000 and has a mortgage of $200,000, along with $100,000 in investments and $50,000 in personal property, their assets total $650,000. Subtracting their $200,000 mortgage yields a net worth of $450,000. This is a simplified example; a comprehensive calculation would consider all assets and liabilities.