Net worth

Net worth is your total assets minus your total liabilities. Assets are anything you own with value: cash, investments, property, a car. Liabilities are anything you owe: loans, credit cardTermCredit card×بطاقة ائتمانA card that lets you borrow money to pay for purchases now and repay the bank later, usually with interest.Open the term balances, mortgagesTermMortgage×الرهن العقاريA loan secured by property, where the lender holds a claim on the house until the debt is repaid.Open the term. The difference between them is what you genuinely own.

It is a single number that captures your financial position at a moment in time. Two people with identical incomes can have vastly different net worth depending on what they have borrowed and what they have built.

Because income tells you what passes through your hands and net worth tells you what stayed. Two people earning the same salary for ten years can end that decade a whole house apart, and nothing on a payslip says which of the two you are becoming.

Its real use is the direction rather than the level. One reading on its own is close to meaningless, because it rests on what a car is worth this month and what a property is guessed at. The same calculation repeated every quarter on the same assumptions draws a line, and the line is the answer. Rising while income is flat means saving is actually happening. Falling while income rises means borrowing is growing faster than earning, which is precisely the case that feels fine month to month.

The number also flatters anyone who counts assets they will never sell. The home you live in and the car you drive to work are not available to pay for anything, so a net worth made mostly of those is a true figure answering a different question from the one being asked. Totalling the liquidTermLiquidity×السيولةHow quickly and easily an asset can be converted to cash without losing value or paying a large fee.Open the term part separately is what turns an inventory into a position.

• Negative net worth means your liabilities exceed your assets, you are in debt by that amount.
• Assets are valued at what they are worth now, not what you paid for them. A car you bought for SAR 50,000 may be worth SAR 30,000 today.
• Net worth changes over time: it rises when you save and invest, and falls when you borrow or spend from capital.
• Take the reading on the same day each quarter and on the same assumptions. Otherwise the change tells you about your estimates rather than about your position.