Search Menu

Simply put, net worth is the difference between the value of what we own and the total amount that we owe. Why does it matter? It’s one way to tell if we’re really getting ahead. Knowing our net worth helps us set goals for our money, make financial plans and track our progress. The most important thing with net worth is not how high it is, but rather which direction it’s headed – may it always be trending up! 

 

Improving our net worth

Net worth is a way of measuring our wealth. It's the amount of cash we'd have if we sold everything and paid off all our debts today. Overall, our financial goal should be to increase and protect our net worth over time.

The safest way to improve our net worth is to reduce the amount we owe, rather than relying on the value of the things we own to increase. For example, property values can fall at times. Rising interest rates will also increase the cost of our debt.

As long as we’re either paying down debt or saving and investing, our net worth will head upwards.

Net worth and retirement

It's possible to be on a high income and still have a low net worth, especially if everything earned gets immediately spent and there's nothing to show for it.

 

Net worth is important when we're thinking about retirement. Most of us want to be debt-free, own a house and have some money to live on when we retire. So before retiring, our main financial goal should be to increase our net worth over time. 

Once we retire, however, our goal may be to reduce our net worth, by using up our savings or selling assets to fund our retirement. But we need to make sure we don’t run out of money before we run out of time! 

Calculating net worth

It's easy to work out your current net worth with Sorted’s net worth calculator. Once you figure out the difference between what you own and what you owe, you can set targets for the future.

Knowing your net worth will help you set goals, which you can review every year or so.

These goals could be, for example, to reduce debt, increase savings or to buy an asset like your own home.

 

Sorted net worth calculator

You may also like...

rich poor 1 v2

BLOG

Cash poor, yet rich?

Longer life expectancies, increased property values and rising costs of living mean that an increasing number of Kiwis are finding they’re “asset rich and cash poor”.

11 Sep, 2018

NEWS

document

Nearly half of first-home buyers would consider buying a rental to get on the property ladder.

30 May, 2018 herald logo

instagram sorted

twitter-symbol

22 May, 2018

rsz istock 874576364 2

BLOG

Is buying Bitcoins really investing?

Bitcoin millionaires seem to be popping up all over the internet, wherever you click. The more often this happens, the more people get interested in Bitcoin and other “cryptocurrencies”.

22 Nov, 2017

iStock 623351254 2

BLOG

Why KiwiSaver balances go up… and down

Quick question: what’s the difference between a savings account and a KiwiSaver account? Short answer: when you put money in, the first always goes up, but the other goes up and...

3 Comments | 15 May, 2017

iStock 506299484 3

BLOG

When robo-insurance gives a bum steer

With a few clicks and a credit card at the ready, it’s easy to buy insurance online.

1 Comment | 8 May, 2017