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wednesday word of the week Jan 30, 2019

Net worth is calculated by subtracting your liabilities from your assets.  If your liabilities are more than your assets, you have a negative net worth.  If your assets are more than your liabilities, you have a positive net worth.

Why It's Important

We have finally reached the last piece to the formula, net worth!  Everyone wants to work towards a positive net worth.  Keep in mind that a net worth calculation is just a snapshot in time.  Your net worth changes very frequently, sometimes even daily or hourly.  It doesn't provide information about cash flow or your monthly income and expenses.  There are other financial statements for that!  

I calculate my net worth officially once a year.  In between time I may take a peek on RightCapital or Personal Capital (both free apps) to see if I am on track. 

You can see my full net worth calculation for this year here.

The formula is Assets - Liabilities = Net Worth.

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