Your net worth is a snapshot of your financial health at a specific moment. It’s a single number that shows what you own minus what you owe. Think of it as your personal balance sheet.

To understand net worth, we need to know two key terms: assets and liabilities.

• Assets are everything you own that has monetary value. This includes things like cash in your bank accounts, investments, your car, and any real estate you own.

• Liabilities are all of your debts or financial obligations. This covers things like credit card balances, student loans, a car loan, or a mortgage.

By subtracting your total liabilities from your total assets, you get your net worth. It can be positive, negative, or zero.

Calculating your net worth gives you a clear, honest look at your financial situation. It's a key indicator of financial health. A positive and growing net worth generally means you are building wealth and making progress toward your financial goals. A negative net worth, common for recent graduates with student loans, highlights areas that need attention.

The real power of net worth comes from tracking it over time. Calculating it annually or semi-annually helps you see your financial progress. Are your assets growing? Are your debts shrinking? Watching your net worth increase can be a great motivator to stick with your financial plan.

Now that you understand the concept, you have a powerful tool for gauging your financial well-being. It's the first step toward taking control of your financial future.