How is 'net worth' defined?

Net worth is defined as the difference between an individual's total assets and liabilities. This calculation reflects an individual's overall financial position at a given point in time. Assets include everything that a person owns with value, such as cash, real estate, vehicles, and investments. Liabilities, on the other hand, encompass all debts and obligations, such as loans and mortgages. By subtracting total liabilities from total assets, one can determine their net worth, which provides a clear picture of financial health.

Other options do not accurately reflect the definition of net worth. For instance, total income earned over a lifetime focuses solely on earnings rather than the balance between assets and debts. The amount of money in savings and checking accounts represents only a portion of an individual's assets, not a complete picture of wealth. Lastly, considering only the value of investments ignores other valuable assets and fails to account for any outstanding liabilities, which are crucial for assessing net worth comprehensively.