Financial Planning

Determining Your Net Worth

Determining your net worth is pretty simple; it is the amount you own after you subtract what you owe. This bit of simple math can be important for several reasons:

  • It is the first step in getting your affairs in order because it tells you where you stand financially. If you are in debt, it gives you an accurate snapshot of the decisions you will need to make in order to turn your finances around.
  • It gives you a reference point. In order to reach your financial goals, you need to have a starting place. From there you can follow the right financial road map to achieve your goals.
  • It will allow you to better protect your assets. Unless you know the value of your assets, it is difficult to choose the proper insurance coverage to protect them.

Many people never take the time to calculate their net worth. However, it can be a great way to see how your spending habits over the years have affected your financial health. The first step is tallying your assets (what you own) and your liabilities (what you owe). Then, subtract your liabilities from your assets; this will give you your net worth.

Important Note: Since your net worth will change over time, you should re-calculate it periodically in order to have an accurate snapshot. We recommend completing this annually, at a minimum, or after major changes. Reviewing each year’s net worth statement can be an encouraging reminder of the progress you have made over the years. You can create an Excel spreadsheet or use your preferred app to keep a more up-to-date calculation.

Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this content, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for you or your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Allos Investment Advisors®, LLC.

The content of this letter does not constitute a tax or legal opinion. Always consult with a competent professional service provider for advice on tax or legal matters specific to your situation. To the extent that a reader has any questions regarding the applicability of any specific issue discussed in this content, he/she is encouraged to consult with the professional advisor of his/her choosing.

Published for the blog on January 16, 2024 by Allos Investment Advisors®, LLC.


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