Why this number matters
Income tells you what is coming in. Net worth tells you what you have actually kept. It is possible to earn very well for a decade and have very little to show for it, and the only way to notice is to measure.
What matters is not the figure itself but its direction. Calculate it once a year, on the same date, and the trend will tell you more about your finances than any single month's budget.
Counting honestly
- Value property at what it would realistically sell for, not at what you hope.
- Include the full outstanding balance on every loan, not the monthly instalment.
- The house you live in is an asset, but it does not fund goals unless you are prepared to sell it. Many households look wealthier than their liquid position suggests.
- Do not include an insurance policy's sum assured. It is not an asset while you are alive.