Money Misc

Net Worth – One Financial Number You Should Know

March 2, 2016

Do you know your net worth? Net worth is probably one of the simplest ways to have an overall snapshot of how you are doing financially. It takes into consideration your assets (everything you have and own) and all your liabilities (everything that you owe) and it’s all tied together in one number… Ta Da! […]

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Do you know your net worth?




Net worth is probably one of the simplest ways to have an overall snapshot of how you are doing financially. It takes into consideration your assets (everything you have and own) and all your liabilities (everything that you owe) and it’s all tied together in one number… Ta Da!

One way to think about it is if you were to hypothetically sell everything you own and then use that money to pay off any outstanding debt.  The money that you have left over is your net worth.  Of course, this is ridiculous, you wouldn’t actually ever do that, but in theory, that’s how it works.

There are few reasons why it is beneficial to calculate this number in addition to just giving you an overview of your financial performance.

First, it allows you to see the benefits as you start to pay down debt, even if your savings and investments are not increasing.

Second, it shows the implications of financial transactions that have an impact on both your assets and liabilities. For example, if you purchase a property, which is an asset, and you have a mortgage, which is a liability, you can see the impact of both.

It is a good idea to track your net worth over time and monitor its progress.  Many people who track it, look at their number once a year, to understand how it has changed.  The exact frequency that you check it, doesn’t matter, just that you monitor it regularly.

Leave a comment below letting me how much you want your net worth to change and in what period of time.  Declaring your goal, will make you more likely to fulfill it!

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