net worth
The total value of everything you own (assets) minus everything you owe (liabilities).
Example
“Her net worth was $500,000: $700,000 in assets minus $200,000 in debts.”
Memory Tip
NET catches what's left after everything. NET worth = what's left after subtracting debts.
Why It Matters
Net worth is the single most important number for tracking your financial health over time. Unlike income which can rise and fall net worth tells you whether you are actually accumulating wealth. Many high earners have low net worth because spending consumes income while many moderate earners build significant net worth through consistent saving and investing.
Common Misconception
Many people calculate net worth by only counting financial accounts and forgetting liabilities. Your net worth is total assets minus total liabilities. A $500,000 home with a $450,000 mortgage contributes only $50,000 to net worth. A $30,000 car loan is a liability that reduces net worth dollar for dollar.
In Practice
Track your net worth monthly using a simple spreadsheet listing all assets and all debts. Watching this number grow over time is one of the most motivating financial exercises available. Even small consistent contributions to retirement accounts compound dramatically over decades into substantial wealth.
Etymology
Net (remaining after deductions) + worth (value) — what you're worth after subtracting debts.
Common Misspellings
Build a budget and track your spending
Related Terms
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See Also
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