Does your bank balance determine how you feel about your money? Or is it the money you’ve invested? Or is it your emergency fund that makes you feel in control?
Maybe the answer is all three. But a better answer would be your Networth.
While Cashflow tells you how your money changes in a month, Networth shows you the bigger picture of your total assets, minus liabilities. So while you may fall off your planned path on a particular month, an upward-moving Networth is a better indicator of how your money is doing.
Why should you care about your Networth?
- A positive net worth implies that what you own is greater than what you owe. This is a good indicator of your financial health!
- Seeing the bigger picture can help you make more informed decisions of your short-term goals.
- More importantly, it can realistically help you estimate long-term goals like an early retirement.
- Tracking Networth can also help you reduce your debt, as you work to grow assets and reduce liabilities.