Net Worth
Net worth
Total every asset at current market value, total every liability at its payoff amount, and take the difference. The result can be negative; that is meaningful, not an error.
The Formula
Net Worth = Assets - Liabilities
Total every asset at current market value, total every liability at its payoff amount, and take the difference. The result can be negative; that is meaningful, not an error.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| A | Total assets | currency | Everything owned that could be sold or converted to cash, valued at today's market price rather than original cost. |
| L | Total liabilities | currency | Every outstanding debt at its current payoff balance, including amounts that would come due early because of a default. |
| NW | Net worth | currency | What would remain if every asset were sold at the listed values and every debt settled today. |
What Each Symbol Means
Acurrency
Total assets
Everything owned that could be sold or converted to cash, valued at today's market price rather than original cost.
Lcurrency
Total liabilities
Every outstanding debt at its current payoff balance, including amounts that would come due early because of a default.
NWcurrency
Net worth
What would remain if every asset were sold at the listed values and every debt settled today.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate net worth page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate Net Worth, filed under Finance. Every number the guide produces comes from substituting into this one line.