How to Accurately Measure an Individual’s Net Worth

Net worth equals total assets minus total liabilities. But true wealth also reflects how many people your assets can support. For example, a debt-free business with 100 full-time employees effectively supports 100 households. If another firm employs 150 people but carries 50% debt, its net support drops to 75. Ownership stakes matter too. A 1% share in a company worth $1 trillion that pays 50,000 salaries means your portion supports 500 employees. That can be as significant as running a 500-person company personally. Always factor in recurring expenses, debt obligations and liquidity. Sometimes someone with a house and a car can be more liquid than a high-net-worth individual with heavy debt.

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