Knowing Your Net Worth: What the Number Means and How You Can Improve It

“A picture is worth 1,000 words.”

For most of us, hearing this well-worn adage brings to mind powerful images that impress us by conveying compelling, succinct stories about life.

What if we made a similar statement about the stories that our financial pictures tell about our lives? That is, what could a picture about our net worth tell us about our current fiscal circumstances, and how could we use such a picture to help us reach our long-term professional and personal goals?

Net Worth: What Is It and How Do I Draw Its Picture?

Despite the demands already crowding our daily schedules and the several “to-dos” on our financial planning lists, taking time to determine one’s net worth is time well-spent. Why? Understanding this figure is a valuable piece of information; the number illustrates our realities and can help inform our financial direction and decisions — today and well into the future.

To determine net worth, subtract your liabilities from assets, although be aware of potential nuances in determining which elements belong to each category. Also realize that the more complicated a financial situation is, the more involved the equation may be.

Typical assets can include:

  • Checking account
  • Savings account
  • Investment account
  • Automobile
  • Residence
  • Personal property
  • Stock options/RSUs
  • Traditional IRA
  • Roth IRA
  • 401(k) trust account
  • Other

Common liabilities include:

  • Credit card(s)
  • Note(s) payable
  • Mortgage loan(s)
  • Home equity loan
  • Auto loan(s)
  • Other

Improving Your Total Net Worth Is Worth It

Calculating one’s net worth allows a person to examine the elements that comprise the number, and can reveal complex stories and attitudes about money and investing. For instance, according to a 2018 VISA Millennial Research Study, millennial women are embracing financial power, confidence and independence. They are advancing women’s thoughts and attitudes about earnings, savings and investing. However, the study also revealed that, when compared to their male counterparts, many of those same women feel higher levels of finance-related stress and strain, hesitate to discuss fiscal issues with their peers, and still struggle internally to foster a healthy relationship with money that is free of guilt, worry, judgement or second-guessing.

Additionally, data show that women must continue to challenge the wrongly held, still-too-common myths that they are not as competent or educated about money matters as men. Women fail to realize they engage in successful savings and investing behaviors, ones that differ from men’s. For instance, women contribute higher proportions of their incomes to retirement plans, stay focused on generating returns by trading less frequently, and avoid “market noises” and a herd mentality in trading that often reduces men’s net annual returns. Yet, for too long these approaches have helped induce shame, loneliness and isolation among women when it comes to talking about finances.

At The Humphreys Group, we believe understanding net worth can bolster our clients’ self-assurance about their fiscal behaviors and competencies. We encourage women to draw a financial picture that conveys their unique story. Then we support their resolve to take specific, actionable steps toward successfully saving, investing and reducing debts. Lastly, we believe routinely assessing one’s net worth can help keep our clients on a steady path toward their long-term goals.

To start creating your own net worth statement, download this handy template. And if you’d like to begin the conversation about understanding your net worth and using it to improve your financial health and well-being, contact us today.

Diane Bourdo, CFP®
Diane Bourdo, CFP®

Diane Bourdo is the President of The Humphreys Group. Diane has dedicated her life’s work to helping women make smart financial decisions. For nearly 30 years, she has developed investment management and financial planning strategies that allow her clients to create lives that reflect their values. Diane was named an InvestmentNews 2020 Women to Watch and has been recognized in Forbes, SF Chronicle, NY Times and more for her work and writing.

Diane Bourdo, CFP®
Diane Bourdo, CFP®

Diane Bourdo is the President of The Humphreys Group. Diane has dedicated her life’s work to helping women make smart financial decisions. For nearly 30 years, she has developed investment management and financial planning strategies that allow her clients to create lives that reflect their values. Diane was named an InvestmentNews 2020 Women to Watch and has been recognized in Forbes, SF Chronicle, NY Times and more for her work and writing.

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