Calculating Your Net Worth: Are you a High Net Worth Individual (HNWI)?

Everyone knows that credit scores, investment portfolios and savings in the bank are a good way to grasp how well you’re doing financially. But, when considering your financial health, do you also take into consideration your net worth? If not, then you should!

Figuring out your net worth is something that everyone should do. It allows you to keep tabs on your personal finances to see if they’re healthy and growing.  You never know, you might even be wealthier than you thought you were!

Calculating your net worth is easy

 To find out what your net worth is, simply take away your liabilities from your assets. There you have it. Your net worth.

Before you can do this calculation, though, you need to work out exactly what your assets are worth and what liabilities you have. This calculation will take a little more work.

As a starting point here are the most common examples of assets and liabilities that the majority of people have.

Assets include:

  • Your home – make sure you know a recent value of your house. Look at similar properties that have sold around you recently. This will help you to come up with a rough estimate if you don’t have time or inclination to get your property valued.
  • Pension
  • Household belongings – This can be a tricky one to work out. Not everything in your home is going to be worth money so focus on the things that are. Your TV, Grandma’s antique vase, the vintage contents of the wine cellar. Use online resources or take items to be appraised to find out the current value for anything you think might be worth a bob or two.
  • Investments
  • Car (the current value, not the value you bought it for!)
  • Savings
  • ISAs
  • Current account balance
  • Cash value amounts of life insurance policies.

Liabilities include:

  • Mortgage
  • Credit card debt
  • Personal loans
  • Student loans
  • Accrued interest

Now you have totted up the value of your assets and liabilities, you can do the sum and discover what your net worth is. Voila.

Benefits of tracking your net worth

Are you as wealthy as you think you are?

The end goal of knowing your net worth is knowing whether it’s close to what you think it should be – or want it to be!

If you’re not quite there yet, don’t worry too much. Net worth (generally) matures as you do. A person in their 30s may find that their net worth is lower than they would like it to be. As you grow older, in theory, your assets should increase, and liabilities decrease. Tracking your net worth can help you to reach the ultimate goal of being a HNWI.

Make tracking your wealth a habit

It is a good idea to keep tracking your net worth on a regular basis to see how your finances are performing. Once you have a better grasp of your worth you can reduce the number of times you track it in a year.

By staying on top of your personal finance figures you will be able to adjust your assets accordingly.

Planning for the future

Knowing exactly what your net worth is will help you plan for your future. Want to retire early? Well, by tracking your net worth, that can be possible.

Generally, your net worth won’t start growing steadily until you are in your 40s. By taking the time to track your net worth you should then, hopefully, see your net worth sharply increase by the time you enter your 50s. This is a sign that you’re making smart financial decisions. Well done you.

With your tracked net worth helping your finances get a clean bill of health, you will be able to comfortably live out your retirement. However early you’d like that to start.

Finding out where to increase your assets

Whilst your net worth isn’t the only factor you should consider when assessing whether to increase risk within your investment, a detailed knowledge of your assets and liabilities will help you make the right decisions. Redistributing the funds in your assets couldlead to a significant growth in your net worth (although that obviously depends on your personal circumstances).

 

Done the sums and figured our you’re a High Net Worth Individual already? Nice one. Now don’t mess it up! We can help you manage what you’ve got to keep things on track. Get in touch, we’d love to help you.

 

The value of investments can rise as well as fall. You may not get back what you invest.

2018-10-08T09:17:47+00:00

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