One of the most common questions we Google when it comes to celebrities and entrepreneurs is [insert name] net worth. At most, it’s a best guess from a gossip magazine that’s pieced bits of information together, as most people don’t give fully audited lists of their assets and liabilities, to the media (except those that are desperate to get onto the Forbes or AFR rich lists).
Regardless there’s something fun about searching for this anyway and peeking behind the curtains, into a world far from our own reality.
But, rather than looking up Matthew McConaughey’s net worth for the umpteenth time, today I want to talk about your personal net worth, which is a far more relevant and useful number to know.
What is your net worth?
Your net worth is the current value of your assets, less your liabilities. It’s just a number used to gauge your current financial status, but it does carry a lot of emotional baggage with it.
Calculating your net worth
To figure all of that out, it’s a good time to work out your assets and liabilities.
Get out a piece of paper or spreadsheet and make a list for each of the following:
- Your assets – do you have savings, super or investments?
- Your liabilities – do you have a car/personal loan, credit card or mortgage?
This may take a bit of time if you’ve never done it before, but knowing your numbers is a critical step in your personal finance journey. A solid understanding of your current financial circumstances will help you start to gain control over your money, just like a business.
So are you ready to work out your current net worth?
It’s simply a matter of performing the below calculation.
Your Net Worth = Your Assets – Your Liabilities
If it’s a negative number, that’s perfectly okay. Now you know your starting point.
Is it important to know your net worth?
Keep in mind that your net worth doesn’t equal your self-worth.
Don’t let the number trap you in a web of comparison and hold you back from achieving your financial and personal goals.
That being said, calculating your net worth can be a helpful place to start when figuring out your current financial positions, designing your goals and figuring out when you have enough for your future.
How often should you check your net worth?
When I first started tracking my net worth, I had a monthly finance meeting with myself, which I scheduled into my calendar. I’ve also been using a Google sheet to track this number, which has columns for all my assets and liabilities. I add a new row each month with updated figures, to assess my current net worth.
However, my main focus is hitting my saving and investing goals each year, which I break into monthly amounts. With this structure, the net worth figure will gradually increase if I keep hitting my monthly targets.
Consider scheduling your own monthly budget meeting to track your financial goals and progress. This ongoing system will make it easier to review your net worth when needed and confirm your financial position at the end of each year.
It’s important not to obsess over the figure, especially as it grows, otherwise you’ll struggle to deal with the swings and roundabouts of the market.
Like most things, use your net worth figure as a guide and reference point, without letting it rule over your life or define you.