Your net worth is your assets minus your debts/liablities. Assets include cash, investments, real estate properties, cars or anything else of value you own. Liabilities are what you owe on those assests including car loans, mortgage and student loan debt.
You can improve your net worth by making your assets larger and/or making your debts smaller. You can achieve this by paying off high interest debts, working overtime, saving and investing money, and reducing your spending.
Yes, but it is not uncommon. When you have more debts than assets, you have a negative net worth. For example, most people cannot afford to pay off a house so they borrow mortage from banks (liability) and end up with a negative net worth. If you do not waste money and keep paying off your debts on time, your net worth will soon become positive.
An asset is anything of value that can be converted into cash. Assets are owned by individuals, businesses and governments.
Cash and cash equivalents – certificates of deposit, checking and savings accounts, money market accounts, physical cash, Treasury bills.
Real property – land and any structure that is permanently attached to it.
Personal property – everything that you own that is not real property such as boats, collectibles, household furnishings, jewelry, vehicles.
Investments – annuities, bonds, cash value of life insurance policies, mutual funds, pensions, retirement plans (IRA, 401(k), 403(b), etc.,) stocks and other investments.A home is an asset, but your mortgage is a liability. Because a mortgage is debt, you need to pay it off before your home is really considered an asset.
Debt is an amount of money borrowed by one party from another. Debt is used by many corporations and individuals as a method of making large purchases that they could not afford under normal circumstances. A debt arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back at a later date, usually with interest.
Credit Card Debt – debt results when a client of a credit card company purchases an item or service through the card system. Debt accumulates and increases via interest and penalties when the consumer does not pay the company for the money he or she has spent.
Home Mortgage – a loan that is secured by property or real estate is called a mortgage. In exchange for funds received by the homebuyer to buy property or a home, a lender gets the promise of that buyer to pay back the funds within a certain time frame for a certain cost.
Student Loan – a type of loan designed to help students pay for post-secondary education and the associated fees, such as tuition, books and supplies, and living expenses.Not all debt is bad. Or, for that matter, good. A mortgage, in most cases, would be considered good debt, whereas putting an expensive meal you can't afford on your first date would be considered bad debt.