Net worth

Your net worth is the difference between the value of what you own and the total amount that you owe. It's the amount of cash you'd have if you sold everything and paid off all your debts today.

Net worth is another way of saying how wealthy you are.

Knowing your net worth is important as a first step in setting your financial goals, and building your financial plan.

Overall, your financial goal should be to increase your net worth over time.

Net worth and retirement

Net worth is really important when you're thinking about retirement. In retirement, most people want to be debt free, have a house, and have some money to live on. Before you retire, your overall financial goal should be to increase your net worth over time.

The composition of your net worth (that is, how it's made up) is important too - it's the balance between your assets that provide a cash income such as an investment fund, and your non-cash producing assets such as your house.

As you approach the end of your working life, you need to replace the income from your job with income from investments. You should alter the composition of your net worth to include more cash producing investments - for instance, selling a house to invest and live off the capital.

Using the Net worth calculator

It's easy to work out your current net worth with our Net worth calculator. Use it to figure out the difference between what you own and what you owe, then set targets for future years.

Knowing your net worth will help you set your goals. You should also review your position, say, once every year. You'll need to ask yourself two things:

Is my net worth increasing overall?

Is the composition of my net worth about right? (That is, do you have the right balance of cash and non-cash assets?)

Next steps

1. Use the Net worth calculator to work out your net worth
2. Use the My goals worksheet to set goals to grow your net worth
3. Use the Budget calculator to create a surplus you can use to save for your goals or reduce your debt.