Put simply net worth is a current view of what you own minus what you owe.
Expanding on that a little, what you own (or in finance speak your assets) is anything that you own that has monetary value. This includes financial accounts from cash in your current account to your savings to your pensions as well as non-financial things such as your home, your car, or any antiques.
What you owe (or in finance speak your liabilities) is anything of monetary value that you owe to someone else. This includes your mortgage, any debts or car loans.
Net worth is a current snapshot of your financial position, it only looks at what you currently have and not what you want to do in the future. The difference between net worth and net wealth is that net wealth takes into account future earnings and spending. At Mintago we tend to focus on the current view (net worth) as we know how uncertain the future can be (thanks for reminding us of that 2020!).
Getting an estimate of your net worth is really simple to figure out:
We have found that people tend to have three big problems figuring out their net worth:
For finding accounts, we recommend using a service like Mintago PensionHunter or the government’s pension finder to help hunt these accounts down.
On the keeping track of accounts over time, use an app like Mintago or MoneyDashboard to store all of your accounts and keep track of this over time.
On the estimating the value of big items, we tend to say focus on your house rather than anything else. Things change and it’s okay for it not to be perfect.
No. Net worth is a snapshot of everything that you own minus everything that you owe therefore income does not come into it. However, any excess income in a year that you don’t spend will be included as part of your net worth the next year!
According to data from the 2014-2016 survey, in the UK the median household (line every household up in order of net worth and pick the middle one) has roughly £260k in net worth, which is just above the average UK house price of £245k.
According to the data, roughly 15% of households have a net worth of more than £1m but note that this includes the value of houses, pensions and everything else.
For the other 85% of the population, this chart may be a bit more useful to figure out where you compare. Please note that net worth varies massively by age, life stage, marital status, family status.
Net worth is one way to check your financial position and spot potential strengths and weaknesses.
Net worth isn’t a perfect picture financially and it certainly isn’t a reflection of someone’s quality of life or life satisfaction.
As net worth changes over time, curiosity about others’ net worth can motivate us to set and pursue financial goals that are important to us. However, as mentioned above, it can also make us feel unnecessarily inferior if you assume that you are comparing yourself to people in exactly the same situation as you (you are not!!).
Wanting to boost your net worth is not a bad thing. There are a load of tactics that we use here at Mintago to build our own net worth that we want to share with you (note: for more tips on creating a financial path, see this blog post):
Image credits: upklyak