The Complete Guide To Calculating Your Net Worth: Important Terms
  1. The Complete Guide To Calculating Your Net Worth: Introduction
  2. The Complete Guide To Calculating Your Net Worth: Important Terms
  3. The Complete Guide To Calculating Your Net Worth: Why Net Worth Is Important
  4. The Complete Guide To Calculating Your Net Worth: Making Accurate Estimates
  5. The Complete Guide To Calculating Your Net Worth: Calculating Your Net Worth
  6. The Complete Guide To Calculating Your Net Worth: What Your Net Worth Means
  7. The Complete Guide To Calculating Your Net Worth: Building Your Net Worth
  8. The Complete Guide To Calculating Your Net Worth: Conclusion

The Complete Guide To Calculating Your Net Worth: Important Terms

When you calculate your net worth, you make a list of your assets and your liabilities; you subtract your liabilities (what you owe) from your assets (what you own) to arrive at your net worth figure. Understanding a few key terms can make it easier for you to make accurate calculations:

Asset
Anything of value that you own that can be converted into cash. Examples include cash, real estate and personal property.

Cash Equivalent Assets
High credit quality investment securities that are short-term and highly liquid. Examples include bank accounts and Treasury Bills.

Financial Statement
Reports that show where your money came from, where it went, and where it is now. Different types of financial statements include balance sheets, income statements and cash flow statements.

Illiquid Asset
An asset that cannot be converted into cash quickly without a substantial loss in value. Examples include houses and antiques and other collectibles.

Investments
Assets or other items acquired in the hope or expectation of future financial returns or benefits. Examples include stocks, bonds and real estate.

Liquid Asset
An asset that can be converted into cash quickly with little to no effect on the price received. Examples include stocks, money market instruments and government bonds.

Net Worth
The amount by which an individual's (or business's) assets exceed its liabilities. Sometimes referred to as wealth.

Personal Property
Everything you own that is not real property. A key characteristic of personal property is that it is movable, as opposed to a house and land which are not movable. Examples include boats, cars, collectibles, furniture and jewelry.

Real Property
Land and any structure that is permanently attached to the land. Examples include houses, barns and detached garages.

Secured Liabilities
A debt that is guaranteed by an asset or lien pledged as collateral. A home mortgage is a secured liability because the house serves as collateral for the loan.

Unsecured Liabilities
A debt that is not guaranteed with collateral. Examples include credit card debt, medical bills and utility bills.

The Complete Guide To Calculating Your Net Worth: Why Net Worth Is Important

  1. The Complete Guide To Calculating Your Net Worth: Introduction
  2. The Complete Guide To Calculating Your Net Worth: Important Terms
  3. The Complete Guide To Calculating Your Net Worth: Why Net Worth Is Important
  4. The Complete Guide To Calculating Your Net Worth: Making Accurate Estimates
  5. The Complete Guide To Calculating Your Net Worth: Calculating Your Net Worth
  6. The Complete Guide To Calculating Your Net Worth: What Your Net Worth Means
  7. The Complete Guide To Calculating Your Net Worth: Building Your Net Worth
  8. The Complete Guide To Calculating Your Net Worth: Conclusion
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RELATED TERMS
  1. Personal Property

    A type of property which, in its most general definition, can ...
  2. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  3. Current Assets

    A balance sheet account that represents the value of all assets ...
  4. Short Term

    1. In general, holding an asset for short period of time. 2. ...
  5. Quick Assets

    Anything having commercial or exchange value that can easily ...
  6. Net Liquid Assets

    A measure that examines a company's net liquid financial assets. ...
RELATED FAQS
  1. What is an asset?

    An asset is anything of value that can be converted into cash. Assets are owned by individuals, businesses and governments. ... Read Answer >>
  2. What does your net-worth consist of?

    Discover what your specific assets and liabilities are and how to classify the components that go into calculating your net ... Read Answer >>
  3. What items are considered liquid assets?

    Learn what a liquid asset is, some examples of liquid assets, what a non-liquid asset is and what determines whether as asset ... Read Answer >>
  4. Are stocks real assets?

    Learn why stocks are classified as financial assets, not real assets. Understand the properties that determine whether an ... Read Answer >>
  5. What are common factors that lower your net worth?

    Net worth is determined by calculating financial assets versus liabilities. As the liabilities increase versus the assets, ... Read Answer >>
  6. What is the difference between an expense and a liability?

    Learn what liabilities and expenses are, which financial statements they are listed on, and the differences between liabilities ... Read Answer >>

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