Monitoring your net worth

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How do you think you have gone the last 5 years? Have you been working really hard but don’t seem to see where your money is going? Do you think you are getting ahead in life or running on the spot? Worse still is your financial position deteriorating?

Your net worth is what’s left over when you add up all your financial assets (such as the money in your bank account, your house or other property, shares and retirement funds) and take off your financial liabilities (such as your mortgage, credit card debt or other loans). It is a snapshot of your financial wellbeing at a point in time.

Monitoring how your net worth is changing over time can be a powerful tool. It can help answer the following questions:

  • Am I building wealth?
  • Do I have a diversified portfolio of assets?
  • How much cash or access to debt should I have for a rainy day or a good opportunity?
  • Am I managing risk with the assets I hold or do I need to reweigh or change asset classed?
  • Is my portfolio of assets both liquid enough and sufficiently income generating for the times?
  • What is gearing (debt) doing to my net worth?
  • Should I take on debt or reduce debt?
  • Are my assets protected?
  • Will I have enough money to retire early?
  • Can I afford to help my kids financially?
  • Am I underinsured?

If you haven’t been reviewing your net worth on an annual basis a quick calculation may prove to be a wakeup call. You may be surprised by what you find.

The main purpose of monitoring your net worth regularly is to make sure your hard work is getting you where you want to be. At NKH we have the tools to break this down simply and diagrammatically so you can assess how you are going annually and help you either stay on course or make changes along the way.