An asset is something you own that has a money value. A liability is an amount of money you owe. Your net worth is your total assets minus your total liabilities.
What counts as an asset
An asset is something you could turn into money. Common examples:
- Cash and bank balances.
- Investments: stocks, funds, ETFs, crypto, gold and other metals.
- Retirement accounts, at their current balance.
- Property, such as a home or land, at a realistic sale price.
- Vehicles, at what they would sell for today.
- Business interests.
- Money owed to you, if you expect to be paid back.
The test is simple: does it have a value someone would pay, and do you own it?
What counts as a liability
A liability is a debt: money you are obliged to pay. Common examples:
- Mortgage
- Car loan
- Student loan
- Personal loan
- Credit card balance
- Overdraft
- Money borrowed from a person
- Unpaid taxes
Use the balance outstanding today. The original loan amount and the monthly payment are not what goes on the list.
Side by side
| Asset | Liability | |
|---|---|---|
| Meaning | You own it | You owe it |
| Effect on net worth | Adds | Subtracts |
| Example | Savings of 22,000 | Credit card of 1,500 |
| Valued at | What it would sell for | The balance still owed |
Borderline cases
A home with a mortgage. Record both. The home is an asset at its realistic selling price; the mortgage is a liability at the remaining balance. With a home worth 300,000 and a mortgage of 220,000, you own 80,000 of it.
A car with a loan. The same logic. List the car at resale value and the loan at the balance. Cars lose value, so a car loan can be larger than the car’s worth.
A loan you made to someone. It is an asset only if you expect to be repaid. If you doubt it, list a lower amount or leave it out.
Retirement accounts. They are assets. Taxes or penalties may reduce what you could actually spend, so some people show them as a separate line.
Things with little resale value. Clothes, furniture and everyday household items are usually left out. You would not sell them for much, and listing them adds noise.
Future money. Your salary, a promised bonus or an expected inheritance is not an asset today.
Bills not yet due. Next month’s rent or utilities are future expenses. An unpaid invoice you already owe is a liability.
Assets and liabilities are not good and bad
Everyday speech sometimes says an asset “makes you money” and a liability “costs you money”. The accounting meaning is simpler and neutral. An asset is owned; a liability is owed. A mortgage is a liability and is not a mistake. A savings account is an asset and says nothing about whether it is enough.
Putting them together
List all assets, list all liabilities and subtract. How to calculate net worth walks through the arithmetic with an example. The personal balance sheet shows how to lay both lists on one page so they balance.
Seeing the two sides at once
Accounted draws assets in one column and liabilities in the other, to scale. Net worth fills the gap, so you can see what is owned, what is owed and what is left. Accounts can be in different currencies, and you can leave an account out of net worth if it should not count. If you hold a mortgage or loan, the mortgage and loans page explains how a loan is tracked. See how it works.
This guide is general information, not financial advice.
General information, not financial advice.