In basic terms, net worth, the difference between a person’s assets (what they own, items of value) and liabilities (amounts owed), is viewed on a person’s personal balance sheet. Assets in the amount of $196,000 minus liabilities of $63,000 results in a net worth of $133,000. However, the amount of net worth may not truly reflect financial security.

When viewing net worth, remember, not all assets have the same financial benefit:

• Productive wealth involves assets that are actively working for you generating income, dividends, interest and capital gains. These include savings accounts, retirement accounts, investment accounts, and rental property.
• Sellable wealth includes assets with a market value that you could and would sell under certain circumstances. While these assets are not generating income, the value would be available if you needed the money.
• Estate wealth includes assets with paper value but that you either can’t or are unwilling to sell. These include your primary home, car, business ownership, and sentimental assets such as family heirlooms and antique collectibles. Home equity and other estate items will usually not be viewed as available wealth.

While home equity and business ownership increase net worth, these have limited usable wealth due to illiquidity. When planning finances, emphasize productive or sellable assets for usable wealth; don’t just seek a larger net worth.

For additional information on net worth, go to:

https://clark.com/personal-finance-credit/a-better-way-to-think-about-your-net-worth/

Teaching Suggestions

• Have students create a proposed future balance sheet that emphasizes productive and sellable wealth.
• Have students use AI research to obtain suggestions for increasing a person’s productive and sellable wealth.

Discussion Questions 

1. Why might a person overlook the value of productive and sellable wealth over estate wealth?
2. Describe actions a person might take to emphasize productive and sellable wealth.