This week I’m going to be looking at the subject of Net Worth, a subject I covered briefly back in Session 93. Back then I defined it and talked about how to increase it, but today’s session is a deeper dive into the subject, inspired by an email conversation I had with a listener called David.
Scroll down for the cheatsheet for this session…
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Net Worth – How Much Is Enough?
Listener David from Glasgow is on the MeaningfulMoney mailing list, and I love for people to hit reply and ask questions and offer suggestions for topics they’d like me to cover.
David and I got into conversation about Net Worth. He wrote this to me:
Re net worth, I am just amazed how little this seems to be of interest and I read very little about the concept in the UK financial websites / papers.
Would be good to have a session on how various people ‘run' their personal finance – for example I have a spreadsheet with various tabs and update my Fidelity S&S ISA and separate share tabs weekly with all sorts of info, then do a ‘net worth' and ‘balance sheet' each month and save on a master tab. I also have tabs for pension, retirement planning, spend and savings targets. All fine as far as it goes, but is there a ‘master class' podcast on the basics you should keep tabs on
So I took this as a prompt to explore the concept of Net Worth in a bit more detail.
In this session, you'll discover:
- The simple definition of Net Worth
- Why, even though it sounds simple enough, it can be tricky to work out what your future Net Worth needs to be
- A possible formula for working out whether your Net Worth is where it should be
- Why it is essential always to work in today's money
- My formulas for working out what your future Net Worth needs to be
- …and how to work back from there to find out what you should be doing now
Next week, I'll answer the second part of David's question and look at some things you should be tracking as you go along.
Remember there's a cheatsheet for this session, which summarises the calculation and the rationale
Resources mentioned in this show
Website: Networth IQ
Book: The Number
Calculator: Voyantist Financial Independence
Transcript: As always, there is a full transcript of this show available by clicking the big blue button below:
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