Future Business Leaders of America (FBLA) Personal Finance Practice Test

Which factor does not directly affect your net worth?

1. Your income level

2. Your assets

3. Your liabilities

4. Your expenses

The correct answer is: Your expenses

Net worth is defined as the difference between an individual's total assets and total liabilities. It is a snapshot of financial health at a particular moment. The factors that directly affect net worth are assets, which are what you own (such as cash, property, investments), and liabilities, which are what you owe (such as loans, mortgages, and credit card debt). While income level can influence net worth over time by affecting how much you save and invest, and expenses can indirectly impact your ability to accumulate assets or manage liabilities, they do not immediately alter the calculation of net worth. Expenses, in this context, are related to cash flow rather than net worth itself. Net worth is specifically a balance sheet measurement, whereas income, expenses, and their interplay affect financial stability and savings capability over time but not the snapshot that net worth provides. Therefore, expenses do not directly factor into the net worth calculation, making this option the correct answer.