Question #13 of GOBankingRates’ Top 100 Money Experts Series
How do I calculate my net worth, and why does it matter?
If net worth sounds like something only the uber-rich have to think about, it’s time to think again. Everyone has a net worth — though some are certainly higher than others — but you might be surprised to learn that you’re worth more than you think. More importantly, your net worth is one of the clearest snapshots of your overall financial health.
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Dr. Preston D. Cherry, a financial planner who calls himself “a life designer in the world of wealth,” is the founder of Concurrent Wealth Management and author of “Wealth in the Key of Life.” He explains how to calculate your net worth, why it matters more than you might realize, and how tracking it over time can help you achieve your biggest financial goals.
Do This Simple Math
Calculating your net worth doesn’t require any complicated technology or sifting through boxes of paperwork; it’s a lot simpler than people think, Cherry said. “It’s just what you own minus what you owe.” To calculate your net worth:
- Add up your assets: This includes cash, retirement and brokerage accounts, investments, your home and even business equity if you have it.
- Then subtract your liabilities: These include credit card balances, student loans, auto loans, your mortgage or any other outstanding debts.
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A Snapshot of Your Financial Story
Once you calculate that number, Cherry encouraged a mindset shift: don’t think of it as a static figure, but as “a snapshot of your financial story.” In his words, “It gives you a sense of where you are and a guide to where you’re going.”
Think of your net worth as your personal financial narrative. “It tells you where you stand, how far you’ve come, and your aspirational future,” Cherry said. In other words, don’t use it to compare yourself to others, but to measure your progress against your own goals.
Tracking your net worth regularly, such as quarterly or annually, can reveal whether you’re headed in the right direction. It can also highlight blind spots, like lingering debt or underutilized savings opportunities, and bring clarity to future decision-making.
A Reflection of Your Financial Choices
Another way to think of net worth, according to Cherry, is as “a reflection of how your financial choices support your well-being.” If your net worth is on the low side, that may show up as struggling to make ends meet or falling short of your goals.
The good news? You can set more aspirational goals and create concrete plans to raise your net worth. “And when you see that number grow, you gain confidence — not just in your finances, but in your future,” Cherry said.
Take These Steps To Grow Your Net Worth
Growing your net worth doesn’t happen on its own unless you already started with millions. Instead, Cherry suggests taking the following steps:
- Automate and activate saving and investing: Your contributions add up with time and compound growth. Use both employer-sponsored and brokerage accounts. Also, don’t be afraid to take calculated risks at opportune times.
- Pay down high-interest debt: It might not seem as exciting as “making money,” but Cherry pointed out that it’s a guaranteed return on your money.
- Avoid both lifestyle creep and deprivation: Learn to spend intentionally so you can enjoy life while also increasing your savings as your income grows.
- Invest in yourself: Money invested in your own education, health, skill-building or personal growth often translates into long-term financial growth.
Consistency Is Key
Remember that net worth isn’t built overnight. “Sometimes it’s boring,” Cherry said. “It’s the result of aligning your habits with your values — and doing so consistently.” Over time, those daily choices can add up to financial clarity and freedom.
This article is part of GOBankingRates’ Top 100 Money Experts series, where we spotlight expert answers to the biggest financial questions Americans are asking. Got a question of your own? You could win $500 just for asking — learn more at GOBankingRates.com.
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This article originally appeared on GOBankingRates.com: Are You Worth More Than You Think? A Wealth Expert Shares How To Calculate Your Net Worth
