To know your net worth, subtract your liabilities from your ________.

To know your net worth, subtract your liabilities from your ________.

• A. income
• B. assets
• C. liabilities
• D. previous net worth

Answer: (B)

To determine your net worth, the correct approach is to subtract your liabilities from your assets. Your assets represent everything you own that has value, such as cash, real estate, investments, and personal property. By assessing your total assets and then subtracting your liabilities—debt obligations like loans, credit card balances, and mortgages—you can calculate your net worth. This calculation gives you a clear picture of your financial health, showing how much more you own than you owe. Understanding your net worth is an essential aspect of personal finance as it helps you gauge your financial progress over time and make informed decisions about budgeting, saving, and investing. The other options do not correctly define the relationship needed to calculate net worth. Income is money earned over a period, liabilities are shown in the formula itself, and previous net worth is simply the prior result of the same calculation and does not aid in arriving at the current figure.

To determine your net worth, the correct approach is to subtract your liabilities from your assets. Your assets represent everything you own that has value, such as cash, real estate, investments, and personal property. By assessing your total assets and then subtracting your liabilities—debt obligations like loans, credit card balances, and mortgages—you can calculate your net worth.

This calculation gives you a clear picture of your financial health, showing how much more you own than you owe. Understanding your net worth is an essential aspect of personal finance as it helps you gauge your financial progress over time and make informed decisions about budgeting, saving, and investing.

The other options do not correctly define the relationship needed to calculate net worth. Income is money earned over a period, liabilities are shown in the formula itself, and previous net worth is simply the prior result of the same calculation and does not aid in arriving at the current figure.