We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is Net Wealth?

Malcolm Tatum
By
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Also known as net worth, net wealth is the total value of assets owned by an individual, company, or other type of organization, less any current liabilities. The goal of most businesses and households alike is to generate a positive net wealth, meaning that the total value of asset surpasses the total amount of debt that is currently owed. There are some slight differences in how net worth or wealth is recorded in various settings, although the basic formula applies for individuals and business entities.

To calculate net wealth, it is first necessary to determine the value of the assets owned by the entity. In many instances, this means considering the current market value of the assets in question, allowing for factors such as depreciation. In the personal accounting records of individuals, the value or worth of the assets is recorded directly as this current market value. For businesses, the asset is typically listed as the original cost of purchase while also identifying the amount of depreciation accrued on that asset since the purchase took place.

Once the value of all assets is determined, the next step is to identify the total amount of liabilities currently owed by the individual or company. For households, this often means any outstanding credit card debt, the balance on car loans and mortgages, and any accounts or tabs that are currently run at local shops. Businesses would also include any outstanding balances due on real estate holdings, equipment, or any receivables that have been declared uncorrectable but are still reflected in the accounting records of the business and have not been written off as bad debt.

After determining the amount of assets and liabilities associated with the individual or company, the calculation of net wealth is very simple. By subtracting the total liabilities from the total assets, it is possible to identify the current level of net wealth held by that entity. Ideally, total assets are greater than total liabilities, indicating the net worth or wealth is positive. In the event that total liabilities are greater than total assets, the net worth or wealth of the entity is considered negative.

Enhancing net wealth typically involves the dual process of refraining from taking on additional debt while also settling current debt, and seeking ways to increase the value of assets at the same time. For example, if a household currently has a net wealth of $50,000 US dollars (USD) that reflects $10,000 USD of credit card debt, paying off the credit card balances and choosing to note make additional purchases will result in increasing the net worth of that household to $60,000 USD. Assuming the household owns stock in one more companies that generates $5,000 USD in dividends during this same period, the net wealth increases from the original figure of $50,000 USD to $65,000 USD.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.