How Do You Compute a Person's Net Worth?

How Do You Compute a Person's Net Worth?

Net worth is calculated by subtracting total liabilities from total assets. Assets are anything that can be converted into cash. This can include real estate, stocks, cars and even intellectual property. Liabilities are all outstanding debts such as mortgages, auto loans, student debt and credit cards.

Sometimes net worth is calculated as tangible net worth, which excludes intellectual property and other intangible assets from the calculation. This can include goodwill, copyrights, patents and trademarks. Tangible net worth is used to represent a more practical value of assets because intangible assets are harder to convert to cash and may be excluded from loan applications.