Understanding Your Net Worth & Comparing It to Others’

Zac Majors

Posted on 04/15/2021

by Zac Majors

Understanding Your Net Worth & Comparing It to Others’

Net worth is basically a measure of how many assets you have against your liabilities, i.e., what you need to pay off. The derived figure can be used to compare your standing against others. However, it is important to note that ’net worth’ only gives a bird’s eye view of an individual’s finances.

Many retirement and financial planners take a peek at your net worth to evaluate the current financial health and what type of plan to offer you – and that’s about it. Let us consider the intricacies involved with the calculation of net worth and how you can compare it to others’.

Understanding Your Net Worth

When looking to calculate your net worth, use the following formula:

Net Worth = Total Assets – Total Liabilities

Here, Assets include cash, cash equivalents, and any other assets that can be converted into cash, such as investments, retirement funds, savings accounts, normal bank accounts, cash available, real estate, valuables and other assets such as jewelry and vehicles.

Liabilities make up any debt that you have to pay off, including your credit card debt. Other examples include loans, mortgages, student loans, medical bills, and more.

The difference between the two make up your Net Worth.

Accurate calculation of anyone’s net worth can be difficult since assigning a value to your assets requires appraisals and audits. If you can’t find a marketable value for your assets or possessions online then you should make a conservative estimate.

What Does Your Net Worth Mean?

A negative net worth means you have more debt than assets. Your net worth is most likely going to fluctuate. For individuals with large liquid portfolios, their net worth can change frequently.  

When you get in touch with Advisors at Centric, they start by determining an ideal net worth for you and then plan to bring you up to that level. Following is a formula used quite often to calculate a "target" net worth:

Target New Worth = (Age X Annual PreTax Income)/10

A plan is then devised in accordance with your target net worth.

Net Worth Comparison

It is important to remember that the net worth of an individual doesn’t reflect the whole picture. Whether the assets considered are inflated or not, what your financial goals are, your overall expenses, and other factors aren’t taken into consideration here.

However, if you want to compare your net worth with respect to your age, here is a graph showing a rough estimate against your peers.

Median Net WorthMedian Net WorthAverage Net Worth
Under 35$11,000$285,700
Over 75$265,000$1,060,000

There are more elements to consider when looking to get a better understanding of your financial situation and net worth. If you are looking to evaluate yourself or want to set life, we recommend you get in touch with Centric today and start shaping a better tomorrow!

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