Taking it in its simplest terms, your net worth is the equivalent of all your assets minus all of your liabilities, or debts. While it sounds simple, not all your assets are equal. Liquid assets, for instance, is defined as assets that can be readily be converted to cash. At first glance, bonds and stocks may appear to be liquid, but often due to maturity dates or current market conditions, they may not be equal to their presumed face value. The same holds true for items of worth, such as jewels, which may be given a certain value on paper, but its resale value would be less. As a result, one should never assume a stated value is what they will fetch in the open market. Debts are the sum total of what you owe creditors and loan entities. It constitutes the residual amount owed on your mortgage, for example. Understanding your net worth is a good place to start when planning for your financial future.

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