At its core, net worth is the simplest—and arguably the most important—measurement of your personal financial health.

Put simply:

Your assets are everything you own that has value. Your liabilities are everything you owe. Subtract the two, and you're left with your net worth—the number that truly shows your financial standing at any given moment.

It doesn’t matter if you make $30,000 or $300,000 a year—if you consistently spend more than you earn or carry heavy debt, your net worth could be zero or even negative. Conversely, someone with a modest income and strong saving habits might have a surprisingly high net worth.

Think of it this way: income is what flows in; net worth is what stays.

Net Worth=Total Assets−Total Liabilities\textbf{Net Worth} = \text{Total Assets} - \text{Total Liabilities}Net Worth=Total Assets−Total Liabilities