Nursing your Net Worth
Is your Net Worth needing some care and attention? Let’s take a look at how to calculate your Net Worth and how to care for it in an ongoing, automated way.
Your Net Worth is simply your Assets, subtracted from your Liabilities:
Assets - Liabilities = Net Worth
Assets are anything that can make you money, gain value or put money in your pocket (401k/403b, Roth IRA, Gold, Silver, Jewelry, Rental Properties, Primary Residence)
Liabilities are anything that lose their value over time, take money out of your pocket (Cars, boats, credit cards, student loans)
Let's say you have $75,000 in your retirement accounts and $25,000 in student loans. Your net worth would be $50,000. Why is this important to know and track?
Remember back to our Finance Friday post on August 5th, Financial Independence Number?
Essentially, when your Net Worth reaches this financial independence number that you calculated, you are financially independent! There are other factors at play, but this is a good rule of thumb and something to track often to make sure your goals remain in place.
Our favorite way to track Net Worth and other key metrics are the free tools at Personal Capital.