Net worth is a financial term that represents the difference between what a person or entity owns and what they owe. It is calculated by subtracting total liabilities, such as debts and loans, from total assets, which include cash, property, investments, and other valuables. A positive net worth indicates that assets exceed liabilities, while a negative net worth means the opposite. Individuals and businesses often track their net worth to assess their financial health over time. Regularly updating this figure can help in setting financial goals, budgeting, and making informed decisions about spending and saving. Understanding net worth is essential for effective financial planning.