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Your Net Worth

Making financial progress involves keeping track of your net worth, even if knowing that number is a much-needed reality check. It allows you to see if you are actually paying down debt or earning money in your retirement account. When you know your net worth, you can set a realistic financial goal. In the digital age, tracking your net worth is less complicated than it once was.

First of all, let’s find out what exactly “Net Worth” means.

Net worth is the amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure of how much an entity is worth. A consistent increase in net worth indicates good financial health. Conversely, net worth may be depleted by annual operating losses or a substantial decrease in asset values relative to liabilities. In the business context, net worth is also known as book value or shareholders' equity.

If you have more debts than assets, you have a negative net worth. For example, if you have a $15,000 student loan, a $10,000 retirement account, $2,000 in cash and $5,000 in credit card debt, your net worth is minus $8,000. Some people review their net worth monthly, after they pay their bills and add to their savings. You can also choose to review your net worth every quarter or on an annual basis.

You can discover your net worth by inputting all of your financial data on a spreadsheet. While this has the drawback of human error and also time consumption, it does keep your information private and off-line.

However, online security is hardly the risk it used to be, and there are a few safe and easy things you can do to track your net worth, and at the same time keep your financial information totally safe online.

People with a substantial net worth are known as high net worth individuals and form the prime market for wealth managers and investment counselors. Investors with a net worth (excluding their primary residence) of at least $1 million – either alone or together with their spouse – are considered as "accredited investors" by the Securities and Exchange Commission.

An online net worth calculator provides an automated way to track your net worth that does not require you to reveal personal information. Typically, online calculators feature boxes that you type the value of various assets or debts into. You press "calculate" to find out your net worth. While you usually cannot save the results, you can take a screen shot of the calculator, and save the image for your records. Compare the images from time to time to see how your net worth is changing.

Online budgeting programs often track net worth for you. This may be the simplest way to track your net worth, as the program does all the math for you. You grant the program access to your various accounts such as your bank accounts, loans, and investment accounts. The budget program totals the amounts in the each account or the amounts you owe to let you know your net worth from day to day. One large drawback of using an online budgeting program is that you have to provide your passwords and personal information.

However you decide to do it, keeping track of your net worth is an important step in staying on top of your personal finances.


Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC

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