{"id":187449,"date":"2024-02-20T18:07:45","date_gmt":"2024-02-20T18:07:45","guid":{"rendered":"https:\/\/www.techopedia.com\/?post_type=definition&p=187449"},"modified":"2024-02-20T18:09:26","modified_gmt":"2024-02-20T18:09:26","slug":"net-worth","status":"publish","type":"definition","link":"https:\/\/www.techopedia.com\/definition\/net-worth","title":{"rendered":"Net Worth"},"content":{"rendered":"

What is Net Worth?<\/span><\/h2>\n

Net worth is a term that\u2019s used to describe the total wealth of an individual, couple, household, or business. It\u2019s a calculation that adds up all the assets owned \u2013 and then subtracts everything owed.<\/p>\n

Techopedia Explains the Net Worth Meaning<\/h3>\n

\"Net<\/p>\n

The most accurate net worth definition is the figure that\u2019s left after you subtract all your outstanding debts from the total value of assets owned. It\u2019s a quick and easy way to estimate the financial well-being of individuals, couples, households, small businesses, large organizations, and even governments.<\/p>\n

Meanwhile, organizations such as the Organisation for Economic Co-operation and Development (OECD) analyze the net worth of different countries.<\/p>\n

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Source: OECD<\/a><\/figcaption><\/figure>\n

Key Purposes of Net Worth<\/span><\/h2>\n

So why does net worth matter? The most obvious reason is that it gives you a good insight into the monetary well-being of individuals and organizations. For example, if your total assets are worth far more than all your liabilities, then you are probably in a relatively strong financial position.<\/p>\n

This can mean you\u2019re better prepared to cope with changing circumstances, such as being hit with unexpected bills or a period out of work. However, if you owe more than you own, then you could be more vulnerable \u2013 particularly if you are suddenly hit with sudden expenses.<\/p>\n

Those with less financial security may have to take out more debt to cover future costs, rather than being able to dip into their savings and investments. It\u2019s also useful to establish the net worth of countries as this can give a fascinating insight into the lives of people living across the world.<\/p>\n

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Source: Statista<\/a><\/figcaption><\/figure>\n

Meanwhile, in 2022, approximately 2.82 billion adults worldwide had a net worth of less than $10,000, according to data compiled by Statista<\/a>. However, 69.4 million adults had a net worth in excess of more than $1m. This illustrates the level of inequality that can be seen in some regions.<\/p>\n

Net Worth in Business vs. Personal Finance<\/span><\/h2>\n

Net worth has always been an important business metric. In most cases, it is referred to as the balance sheet<\/a> of a company. It will list all the various assets and liabilities of the organization. This can then be used to determine whether the business is making money or mired in debt.<\/p>\n

It\u2019s a concept that translates easily to individuals. Every person will have their own net worth \u2013 even if this figure will vary enormously between negative and positive.<\/p>\n

For example, the richest will be known as high (or ultra-high if they are particularly wealthy) net worth individuals as they will have a lot more assets than debts.<\/p>\n

Conversely, those who are heavily in debt and own very little are likely to have a negative net worth. This means their outstanding liabilities are higher than the value of their assets owned.<\/p>\n

How to Calculate Net Worth?<\/span><\/h2>\n

So, how can you establish your own net worth? The starting point is establishing the value of all the assets owned. Basically, this includes cash, investments, and anything that can be sold for a monetary value.<\/p>\n

For some elements, such as savings in bank accounts, calculating the value will be simple. However, you may need an expert valuation for properties, vehicles, and other items.<\/p>\n

<\/span>Key Assets to Include<\/strong><\/div>
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