Paying Down Debt: How a $600 Payment Affects Your Net Worth

If you paid $600 toward unpaid bills, here's how it would impact your financial picture:

Assets: Your cash on hand would decrease by $600. Cash is considered an asset, and using it to pay bills reduces the amount you hold.

Liabilities: Unpaid bills are outstanding liabilities. By paying $600, you're reducing these liabilities by the same amount.

Net Worth: Net worth is calculated as Assets - Liabilities. Since both your assets (cash) and liabilities decrease by $600, your net worth remains unchanged.

In summary: While paying down debt doesn't directly increase your net worth, it improves your financial health by reducing what you owe. This can lead to lower interest charges and a better credit score over time.