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Net Worth

Definition: The amount of equity a company has, which is the difference between its total assets and total liabilities.

Your net worth is just as important as your income. Every now and then, you should sit down and tally up your personal assets and liabilities, just as you do with your business, to figure out where you stand. Enter actual or estimated market values on each line and total just as you would a balance sheet.

You can grow your net worth through some combination of decreasing liabilities and increasing assets. Why should you care if your net worth grows? One common reason is retirement planning. Simply put, the more assets you have, the more comfortable your retirement will be. You may also need a high personal net worth to buy a business, pursue some types of investments, purchase a second home, pay for a child's college education, or for other purposes.

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