Assets vs. Liabilities
An asset is anything you own that has value — cash, investments, a home, a car. A liability is anything you owe — a mortgage, student loans, a credit-card balance. Subtract liabilities from assets and you get your net worth, the bottom line of your finances.
Assets minus liabilities is your net worth, which is the single number that tracks financial progress — income measures what passes through your hands, net worth measures what stays. Not all assets behave alike: investments and a paid-down home tend to appreciate, while a car reliably loses value, so a household can look asset-rich and still be going backwards. A home is usually both at once, appearing as an asset at market value and a liability at the mortgage balance, and only the gap between them is yours. The wealth-building move is converting income into appreciating assets while keeping liabilities, especially high-interest ones, small.