In personal finance, what does 'net worth' represent?

Net worth represents the financial position of an individual at a specific point in time and is calculated as the total value of personal assets minus liabilities. This metric provides a snapshot of what a person owns (assets) versus what they owe (liabilities).

By considering both assets, such as cash, real estate, stocks, and personal possessions, alongside liabilities like loans, mortgages, and credit card debt, net worth encapsulates a person's overall financial health. A positive net worth indicates that assets exceed liabilities, while a negative net worth suggests the opposite. This measure is essential for evaluating financial progress and making decisions regarding budgeting, saving, and investing.

The other options do not capture the comprehensive financial picture that net worth provides. For example, total income over a lifetime focuses solely on earnings without considering debts, monthly expenses pertain only to cash flow rather than overall financial health, and total savings in bank accounts do not account for liabilities, which are vital to understanding net worth.