How does a consumer calculate their net worth?

Calculating net worth involves assessing the financial situation of an individual or household. To determine net worth, one must subtract total liabilities from total assets.

Assets are anything of value owned by the consumer, such as cash, real estate, investments, and personal property. Liabilities encompass all debts and obligations, including loans, credit card debts, and mortgages. By subtracting the total liabilities from the total assets, a consumer can arrive at their net worth. This figure provides critical insight into financial health, indicating whether an individual has a positive or negative net worth.

Understanding this calculation is fundamental for anyone managing their personal finances, as it reflects their overall financial standing and can influence future financial decisions and planning.