To create personal wealth, you must understand the language. In this section, you'll learn about assets, liabilities and net worth.
What is your net worth? Use the following formula: assets (what you own) minus liabilities (what you owe) equals net worth (your wealth).
An asset is anything an individual or business owns that has commercial or exchange value. Personal assets may include a savings account, a retirement plan, stocks and bonds or a house.
Liabilities are your debts — what you owe. This may be your home mortgage, your credit card balances, a car loan, student loans or medical bills.
He lists all his assets...
|Value of home and car||$||14,000|
...and all his liabilities.
|Car loan balance||$||13,000|
|Credit card balance||$||3,000|
|Student loan balance||$||5,000|
Bob subtracts his liabilities from his assets to calculate his net worth, or wealth.
Using Bob's balance sheet as an example, you can figure your own net worth here.
Here is the calculation of your net worth.