Your Financial Health

Day 4 - Economic net worth

In Chapter 1, we write about financial health and how it is measured. What it means to be rich is normally characterized by what one owns versus what one owes. Accountants call this “net worth.” The Forbes list of the wealthiest uses a net worth measure.

We own the clothes in our closet, the electronics in our home, and other personal effects. If they can be sold on eBay, they have value. Add in a car, home, and a few shares of stock, and what we own is larger. Did we borrow to buy more assets? Then, our assets may be larger, but so are the debts. In this case, our worth may not change much—on net.

There is a better measure of your wealth that will make you feel better.