When it comes to financial health, income only tells part of the story. A more complete picture comes from knowing your net worth—a simple, powerful number that helps you understand where you stand financially and whether you're making progress toward your goals.
What Is Net Worth?
Net worth is the difference between what you own and what you owe. It reflects your ability to build, manage, and grow your financial resources over time—not just how much you earn.
How to Calculate It
Calculating your net worth is easier than you might think:
List all your assets: savings, investments, retirement accounts, real estate, and any other valuable property.
Subtract your liabilities: mortgages, car loans, credit card balances, and other debts.
Assets – Liabilities = Net Worth
That number gives you a clear snapshot of your financial situation.
Why It Matters
Think of net worth as your personal financial progress report. Your income might go up and down, but if your net worth is growing steadily, you're moving in the right direction.
Tracking your net worth can help you:
1) Measure how well your financial habits are working
2) Spot opportunities to pay down debt or save more
3) Stay focused on long-term goals like retirement or financial independence
I recently spoke with a journalist at Investopedia about how individuals can track and improve their net worth—check out the article for more tips and context at https://www.investopedia.com/average-american-net-worth-by-income-bracket-11678401
Do You Need a High Income?
Not at all. While earning more can help, building a strong net worth is more about how you manage your money. Living within your means, saving consistently, and investing wisely matter far more than hitting a specific income number. Many people with modest incomes build meaningful net worth over time by making intentional choices with their money.
How to Improve Your Net Worth
There are two main ways to grow your net worth:
1) Increase your assets by saving regularly and investing for long-term growth
2) Reduce your liabilities by paying down debt and avoiding unnecessary expenses
Even small changes—like automating your savings or tackling high-interest debt—can add up over time.
How Often Should You Check It?
Reviewing your net worth once per quarter is a good rhythm for most people. It gives you enough time to see progress without getting distracted by short-term market ups and downs. If you’re working toward specific goals—like paying off a loan or saving for a home—you might check in monthly for motivation and accountability. If you’ve never calculated your net worth before, now is a great time to start. It’s a simple habit that builds awareness and empowers better financial decisions over time.
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