The Value of Understanding Your Net Worth

While your paycheck might look good on paper, understanding your true financial picture means looking at the whole equation. We’ll explore what net worth means, why it matters more than you might think, and how your net worth provides a snapshot of your overall financial health.

Net Worth: The Number That Actually Matters

Forget about comparing salaries or counting the zeros in your checking account. Your net worth tells a much more interesting story. It’s the real measure of financial progress – and it might be better (or worse) than you think.¹

Breaking Down the Basics

Think of net worth as your personal financial balance sheet. It’s a way to get a snapshot of where your finances stand right now.² Let’s dig deeper.

Your assets include:

• Money in your checking and savings accounts
• Your retirement accounts (yes, even the ones you haven’t checked in months)
• Your car
• Your home, if you own one
• Collectibles¹

Your liabilities include:

• Student loans
• Credit card balances
• Car loans
• Mortgage
• Any other debts³

Why Should You Care?

Here’s the truth: Your salary isn’t everything. While the average American household has a net worth of $1,059,470, the median is just $192,700—highlighting how extremely high values can significantly impact average calculations. You might earn six figures but still have a negative net worth if student loans and credit card debt eat up your wealth—this is particularly evident in your 20s, where despite an average net worth of $120,000, the median is only $30,160, mainly due to student loan debt and early-career salaries.⁴

Meanwhile, your friend making half your salary could build wealth through smart saving. This strategy becomes apparent in the data showing how net worth typically doubles between your early 30s ($258,073) and late 30s ($501,289) for those who focus on wealth accumulation rather than just income. The financial reality is that building wealth is about the gap between what you earn and what you keep, not just your paycheck size.⁴

Building Your Number

Ready for some good news? Your net worth isn’t fixed. Here are a few things you may want to address regarding your net worth.

Attack those debts (yes, every extra payment counts).
Save consistently. Small amounts add up.
Work with a financial professional to stay on top of your investment strategies.
Keep disciplined through market fluctuations and focus on the long term
Take care of your valuable assets.²

Remember, your net worth will bounce around as you pay off debt, save money, and navigate life’s changes. That’s normal—what matters is the long-term trend.³

Track Your Progress

Consider calculating your net worth like checking your GPS during a road trip—it helps you know if you’re heading in the right direction. Many young professionals check their numbers quarterly or yearly to stay on course. If your assets and liabilities don’t show what you want to see, you can use that information to change course and improve your financial picture.^1,2

Understanding your net worth isn’t just about numbers – it’s about taking control of your financial future and making informed decisions about your money. Let’s talk about strategies to help you build lasting wealth.

Sources: