Net Worth Matters

A Better Measure of Financial Health: Net Worth

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Consistent growth in income or assets are indicators of positive financial health, but when liabilities grow faster than assets, or the value of assets drop, the result is negative net worth. Net worth is calculated by subtracting liabilities (owed debt) from assets owned. It is estimated for both individuals and companies and is an accurate determination of how much something (or someone) is worth. The results of this calculation can fluctuate based on assets decreasing or increasing in value, or acquiring more or paying off debt. 

Before investing in a company tied to the stock market, financial analysts examine the stability of a company by evaluating the net worth of the company and other factors; profits and earnings, leadership, years in business, etc. Your retirement and investment accounts can impact if the company you’ve invested in has a decline in net worth or the stock valuation changes. This decline can directly affect your personal net worth. 

People tend to compare what they have to their peers; they examine the house or the car, but net worth and financial success is something that is not always visual. Doing your net worth calculation can help determine if you are moving toward a positive net worth or not.

It’s easy to get caught up in ‘stuff’ especially if you have to finance purchases. Remember that the purchases may lose value over time as they become older. Automobiles and sometimes homes can lose value based on geography, economic conditions, and aging neighborhoods. Whether you’re trying to become a millionaire before you retire or pay off all your debt, net worth matters because it’s a good tool to measure your progress.

Discussing your net worth at your financial planning meeting can be beneficial and provide you with information to help keep you on track with your financial goals.  Remember it is always an accurate indication your of financial health – for better or worse.  

© 2024 Trajan® Wealth LLC. Nothing in this blog is intended as investment advice, nor is it an offer to buy or sell any security. Please consult your financial advisor for questions about your personal financial situation. All investments involve risk, including the potential for loss. Trajan Wealth clients and employees may have a position in any of the securities mentioned. Portfolio holdings and other data are subject to change at any time and without notice. Additionally, the above links provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. These materials are for informational and educational purposes and are not designed, nor intended, to apply to any person’s individual circumstances. It does not take into account the specific investment objectives, tax and financial condition, or particular needs of any specific person. Please consult with your legal and/or tax advisor before making any tax-related decisions.