What Is Net Worth?

Net worth is a way to track your financial progress or to get a snapshot of your financial status at a given time. In a way, net worth can be thought of as a measure of your financial health. The greater your net worth, the greater your ability to achieve major financial goals and to withstand unexpected financial stresses, such as being laid off or having a serious illness.

I should emphasize, however, that net worth is not a contest. The point is not to have a higher net worth than your friends and co-workers, but rather to use net worth as a tool to evaluate your own financial situation and progress. There are no net worth yardsticks to measure yourself against.

For one thing, net worth naturally changes with age. For most people, it will increase throughout life up to the time of retirement. If, for example, you have recently graduated from college, it is very possible that your net worth will be less than zero because you owe college loans and own basically nothing, and that’s perfectly okay. If you are 50 years old and have a negative net worth, however, it’s a good sign of problems.

Another factor is the kind of life you have chosen to live. Some occupations are higher paying than others, and perhaps you have chosen a lower paying career based on non-financial rewards. There’s no reason, for instance, that a public school teacher should expect to have the same net worth as a heart surgeon at the same age.

Taken From : Manage Your Money and Investments with Microsoft Excel

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