Simply net worth may be defined by a mathematical equation:
assets – liability = net worth. Assets include all your cash in savings and checking account, equity, investments, retirement accounts, jewelry, art, antiques, furniture and every other thing which has its own value. On the contrary liabilities are made of all your debts such as car loan, student loan or housing loan, mortgages and credit card debts. By calculating and knowing your net worth you may become aware of your financial life. Also your net worth is a symbol that how strong or weak is your financial condition. Normally net worth is positive but in some cases it may be negative also. Generally it is negative when you are at the start of your career and you have to pay your student loan. It may be understood by an example. Assume you are earning $ 45000 a year, you have saved $ 5000 in your savings account, you also have $ 3000 in your emergency savings account, current value of your car is $ 7000 but you don’t have anything else of considerable value. You have to pay $ 25000 against your education loan. So your assets value is $ 15000 and your liability is $ 25000, thus your net worth is -$ 10000. Gradually when your student loan will become low it will move towards zero and when it is totally paid it will become positive.