Net Worth - Part 2
OK, so assuming you have a list of all the things you own and all your savings accounts etc. it's time to tally them up. This will introduce an important distinction between two classes of "stuff": Assets and Liabilities . The definition is simple - an Asset is anything that earns money and a Liability is anything that costs money. In its simplest form, an asset is money in a savings account earning some interest. One of the most obvious forms of liability is a loan or credit card debt. A more complex example is a car. This is an assest because it's worth something, but it's also a liability because it loses value each year. The same is true of "stuff" (TVs, furniture etc.) The most disputed is probably that of a house, but we'll leave that for a later post. For the moment, it counts as an asset. 1) Total up the assets - savings, pension, value of your home, stuff you own etc. 2) Total up the liabilities - loans (don't count a UK stu