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What does someone’s “net worth” mean, and how do you calculate it?

When it comes to money and people, the term “net worth” gets thrown around a lot, especially among wealthier individuals.

Most people imagine a net worth as a sum of money sitting in someone’s bank account, but it is more than just that.

Here is everything you need to know to understand what someone’s net worth means.

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What is someone’s net worth?

Aside from a person’s income, a net worth also includes their assets. Once those are added together and the debt is subtracted, that gives you someone’s net worth.

Assets are made up of various things likes stocks, bonds, houses, art, vehicles, and other items and goods with monetary value.

Debit includes loans and credit card debt.

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People believe the wealthiest people make a lot of money working, but often they own very expensive assets, bolstering their net worth.

Calculating the net worth of a very wealthy person can prove to be complicated.

Many wealthy people hide the value of their assets to avoid paying taxes. As seen in the Pandora Papers, various wealthy world leaders used tax codes and offshore accounts to illegally hide their wealth.

According to AS.com, leaders in the Pandora Papers that were named included over 300 public officials and 35 world leaders. Vladimir Putin from Russia and King Abdullah II from Jordan were both named.

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How can I find out my own net worth?

To find out your own net worth, you need to add together your assets and liabilities.

This means you combine your bank account totals as well as any items you have of value like vehicles and jewelry.

Then, combine your debt which could include any loans or credit card debt.

Subtract your liabilities from your assets to find your net worth.

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In the U.S. older people typically have a higher net worth due to their collection of high valued assets.

The average net worth for households in 2020 was $121,700.

Specifically for those between 65 and 74, their net worth was double.



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