Net Worth – Explained

Net Worth: The Most Important Number in Your Financial Life

You no longer have to wake up early to go into work and clock the hours at your standard 9 to 5 job. All you have to do have a net worth equal to 20 times your annual household income. Great! So how do we achieve this? Let’s start by looking at the basics of net worth.

Net Worth, Assets, Liabilities, Personal Finance,

Net worth is defined as all assets less all liabilities. The table below outlines common examples of assets and liabilities.




Net Worth
Checking Account  

Credit Cards




Net Worth

Savings Account Medical Bills
Investments (401k, IRA) Student Loans
Real Estate Mortgage

The sum of all assets minus the sum of all liabilities results in your net worth.

The following table provides an example:

Assets Liabilities = Net Worth








Credit Cards















Medical Bills




Student Loans


Real Estate





In this example, the assets total to $325,000 and the liabilities total to $215,000. This results in a net worth of $110,000.

Spend some time to calculate and understand how it impacts your personal situation. It is the single most important number in your financial life.

Check out the Assets and Liabilities pages to learn more about how these items impact your net worth.