What is net worth a measure of?

Net worth is fundamentally a measure of the difference between an individual's total assets and total liabilities, providing a clear snapshot of financial health at a specific point in time. When you subtract total liabilities from total assets, you are left with net worth. A positive net worth indicates that an individual owns more than they owe, reflecting financial stability, while a negative net worth implies the opposite.

This measure is vital for assessing financial position and making informed financial decisions, whether for planning, budgeting, or evaluating progress toward financial goals. It's a straightforward yet powerful indicator that helps individuals understand their financial standing relative to what they own and owe.

Other options focus on specific aspects of financial situations—current account balances and cash reserves pertain only to liquid assets, projected earnings address future income rather than current financial standing, and overall financial planning success encompasses broader concepts beyond just the balance of assets and liabilities. While they are important financial metrics, they do not encapsulate the comprehensive assessment that net worth provides.