Your net worth is by far the most powerful number that determines your overall financial wellbeing. It’s a number that’s often overlooked in favor of higher credit scores. A high credit score may simply mean you can get approved for more loans. This can lead to more debt.
Your Net Worth is the Most Important Financial Number
Your net worth is an overall financial snapshot of where you are today. If your net worth is positive, it means you have enough assets to cover your liabilities. Having a negative net worth means you may not have enough assets (savings, investments, or items of value) to cover your liabilities. Negative net worth can increase the likelihood of experience future financial stress.
Net worth is the value of your assets, minus the total of your liabilities. Basically, net worth is what you own minus what you owe. Your net worth does fluctuate base on increases in your savings rate, asset accumulation, and debt obligation.
Calculate your net worth by:
Net Worth = Assets (what you own of value) – Liabilities (what you owe)