What does net worth indicate?

• A. Annual income.
• B. Overall financial health and progress over time.
• C. Monthly expenses.
• D. Credit score.

Answer: (B)

Net worth shows your overall financial health and progress over time because it puts everything you own and owe into one number. It’s calculated by subtracting what you owe (liabilities) from what you own (assets). When you pay down debt or grow your assets, your net worth goes up, and tracking it over months or years reveals whether you’re building wealth or slipping behind. This is different from income, which is money you earn in a period, and from monthly expenses, which track what you spend in a short window. It’s also not a credit score, which is a rating of your creditworthiness based on borrowing and repayment history. Net worth gives a snapshot of your financial position at a point in time and how that position changes as you manage assets and debts. For example, having $100,000 in assets and $60,000 in liabilities yields a net worth of $40,000; increasing assets or reducing liabilities will raise that number, signaling financial progress.