Net worth
What it means
Everything you own (cash, investments, property) minus everything you owe (debt, loans, credit card balances). The single number that summarizes your actual financial position.
Why it matters
Tracking it over time — not your account balance alone — is the honest measure of whether your money decisions are actually working.
A worked example
Add what you own and subtract what you owe. Say a car worth 180,000, savings of 40,000, investments of 230,000 — total assets 450,000. Against that, a car loan of 90,000, a student loan of 250,000 and a credit-card balance of 40,000 — total debts 380,000.
Net worth is 70,000. The figure people usually quote about themselves is the 450,000, and it is the 70,000 that describes the actual position.
What people get wrong
Two errors recur. The first is counting the home you live in as an investment. It is genuinely an asset and belongs in the calculation, but it does not fund your retirement unless you are willing to sell it and live somewhere cheaper — so a net worth composed almost entirely of the house you need to keep living in overstates what is actually available to you.
The second is tracking the number monthly and reacting to it. Net worth moves with markets and is meant to be read as a trend over years. A quarterly or annual check tells you what you need to know; watching it more often mostly generates anxiety and, occasionally, badly timed decisions.
How this works in Latin America
Two complications are common in the region. Property held without fully clear title, or a family business with no formal valuation, is real wealth that resists precise measurement — the honest approach is to include it with a conservative estimate and a note, rather than either inflating it or leaving it out.
The second is currency mismatch. Assets denominated in local currency alongside debts denominated in dollars is a position that worsens on its own whenever the local currency weakens, with no decision taken on your part. Anyone holding foreign-currency debt should calculate net worth at more than one exchange rate to see how much of the figure depends on where the rate happens to be sitting today.