Some say Net Worth is a GOOD number to track in order to determine whether you are making financial progress. Others say it’s the ONLY number to track.
What is net worth ?
Net worth (also generally referred to as wealth) is one measure of an individual’s material well-being or financial success, calculated by the amount by which assets exceed liabilities or debt. And yes; it’s possible to have a negative number especially for young professionals with student debt; don’t despair.
Assets – Liabilities = Net Worth
Why does it matter?
I have found too many individuals focused on the estimated value of their assets (say the growing estimated value of a home for example), not taking into consideration the growth of their debt over time. That’s the advantage of tracking Net worth as opposed to Total Asset Accumulation. It’s the NET and the NET movement in financial progress that matters over the long term for you and your family.
Knowing your net worth is an important aspect of personal financial planning. It can be a wealth strategy or a benchmark for wealth or financial fitness much like your weight is a measure in a weight management program. It can also be a powerful motivator to save more, spend less, pay off debt or to work proactively with a professional financial advisor to map out a financial plan.to financial success.
Net worth is worth knowing as it represents the degree of flexibility one might have to respond to unexpected or unforeseen circumstances like a job loss, an unexpected illness or a drop in the financial markets. A healthy net worth can provide individuals with opportunities like starting a business or going back to school. Ultimately, retirement at some time in the future net worth will be utilized in order to fund retirement and cover living expenses.
So..Track or Update regularly
No doubt your Net Worth will fluctuate over time but hopefully it will grow in the right direction. Regular financial checkups with a financial advisor can help you keep on track with your financial goals like going to the doctor for a health checkup. It will help ensure that your savings and spending are held in check.
The good news is that you don’t need to be an accountant to calculate net worth; a simple excel spreadsheet or an online tool can be used. The other good news is that I would be happy to send you an excel sheet so you can calculate and update your net worth on a regular basis. Just connect with me and I would be happy to send an excel sheet to your for free without obligation. Or connect with me so we can work together on building your Net Worth.
