[et_pb_section fb_built=”1″ custom_padding_last_edited=”off|desktop” _builder_version=”4.27.2″ custom_margin=”0px||0px||false|false” custom_padding=”0px||0px||false|false” custom_padding_phone=”0px||||false|false” da_disable_devices=”off|off|off” locked=”off” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row column_structure=”1_3,2_3″ _builder_version=”4.27.2″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” width=”100%” custom_margin=”0px||0px||false|false” custom_padding=”0px||0px||false|false” global_colors_info=”{}”][et_pb_column type=”1_3″ module_class=”table-contents” _builder_version=”4.23″ background_color=”#f3f2f6″ custom_padding=”25px||25px||true|false” sticky_position=”top” sticky_limit_bottom=”section” sticky_position_tablet=”top” sticky_position_phone=”none” sticky_position_last_edited=”on|desktop” pac_dcm_carousel_specific_module_num=”0″ border_radii=”on|24px|24px|24px|24px” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.23″ text_font=”||||||||” global_colors_info=”{}” background__hover_enabled=”on|desktop”][\/et_pb_text][\/et_pb_column][et_pb_column type=”2_3″ _builder_version=”4.16″ custom_padding=”|||” pac_dcm_carousel_specific_module_num=”0″ global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Intro” _builder_version=”4.27.4″ header_2_font_size=”32px” custom_padding=”0px||0px||false|false” header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}”]<\/p>\n
Net worth is a fundamental measure of an individual\u2019s or a business\u2019s financial health because it represents the difference between the total assets you own and the total liabilities or debts you owe. In simpler terms, think of it like a snapshot of your current financial position.<\/p>\n
For individuals, knowing your net worth is a useful tool to see how financially stable you are right now, and plan for future goals like retirement savings, debt consolidation, and cash management, or making big investments.<\/p>\n
For businesses, you might see it referred to as equity or book value on the balance sheet.<\/p>\n
Calculating net worth is very straightforward:<\/p>\n
Net worth = Total assets \u2212 Total liabilities<\/em><\/p>\n <\/p>\n [\/et_pb_text][et_pb_image src=”https:\/\/www.reckon.com\/au\/wp-content\/uploads\/2025\/01\/Net-Worth-Equation-2.png” title_text=”Net Worth Equation 2″ align=”center” _builder_version=”4.27.4″ _module_preset=”default” custom_margin=”|-30px|||false|false” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″][\/et_pb_image][et_pb_text _builder_version=”4.27.4″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n <\/p>\n These include anything you own that has financial value. Generally, they are separated into two categories: tangible (physical items) and intangible (non-physical but monetary assets), with a few examples being:<\/p>\n Liabilities are your debts that you need to repay, with the most common liabilities including:<\/p>\n As an example of net worth,<\/strong> imagine someone with the following:<\/p>\n Assets:<\/strong><\/p>\n Liabilities:<\/strong><\/p>\n In this scenario, you\u2019d use the following calculation:<\/p>\n Net worth calculation = ($700,000 + $200,000 + $20,000 + $30,000) \u2212 ($400,000 + $10,000 + $15,000)<\/em><\/p>\n Net worth: $950,000 \u2212 $425,000 = $525,000<\/em><\/p>\n This person has a positive net worth, which means their assets are higher than their liabilities.<\/p>\n Having a positive net worth means your assets are greater than your liabilities. As you are in a healthy financial position, it means you can take advantage of financial opportunities and secure better loan terms, as well as plan for the future with total confidence.<\/p>\n On the other hand, a negative net worth is when your liabilities are higher than your assets. If you owe $1 million on your mortgage but your property is only worth $950,000, for example, then that liability puts you in a negative financial position.<\/p>\n Negative net worth doesn\u2019t always translate to poor financial management \u2013 it can be common at certain stages of life, such as early in your career when debt like personal loans might outweigh your assets.<\/p>\n <\/p>\n [\/et_pb_text][et_pb_image src=”https:\/\/www.reckon.com\/au\/wp-content\/uploads\/2025\/01\/Net-Worth-4-reasons-2.png” title_text=”Net Worth 4 Reasons 2″ admin_label=”Image” _builder_version=”4.27.4″ _module_preset=”default” global_colors_info=”{}”][\/et_pb_image][et_pb_text _builder_version=”4.27.4″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Using a net worth calculator can simplify the process of adding up all your assets and liabilities. There are lots of free online tools that will let you enter the details of your finances and give you an instant calculation<\/a>.<\/p>\n It\u2019s also a good idea to use spreadsheets and other financial apps. Tracking your net worth in a spreadsheet or personal finance app means you\u2019ll be able to regularly update values and monitor any big changes over time.<\/p>\n <\/p>\n [\/et_pb_text][et_pb_image src=”https:\/\/www.reckon.com\/au\/wp-content\/uploads\/2025\/01\/How-to-improve-your-net-worth-2-.png” title_text=”How To Improve Your Net Worth 2″ admin_label=”Image” _builder_version=”4.27.4″ _module_preset=”default” global_colors_info=”{}”][\/et_pb_image][et_pb_text _builder_version=”4.27.4″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Raising your average net worth over time is possible \u2013 you\u2019ll just need to focus on a few strategies that either reduce liabilities or increase financial assets. Here are some suggestions:<\/p>\n 1. Pay down debt<\/em><\/span><\/p>\n Getting rid of high-interest debts like credit card debt and personal loans will free up money for saving and investing. Strategies like the debt snowball (paying off smaller debts first) or debt avalanche (tackling high-interest debt first) can be helpful here.<\/p>\n 2. Build savings<\/em><\/span><\/p>\n Make regular contributions to your savings account and super fund to boost your asset base. Setting up an automatic savings plan will make consistency a breeze.<\/p>\n 3. Invest wisely<\/em><\/span><\/p>\n Investments in stocks, bonds, or property can grow your financial assets over time. If you\u2019re unsure, speak to a financial advisor to develop an investment strategy that matches your goals.<\/p>\n 4. Increase your income<\/em><\/span><\/p>\n Maybe you can boost your earnings through a side hustle, or go in search of higher-paying roles to give you the extra funds you need to pay off debts or invest more.<\/p>\n 5. Get a handle on your spending<\/em><\/span><\/p>\n Budgeting can help you control unnecessary spending and make sure your money is working towards improving your net worth.<\/p>\n Banks and lenders use net worth to see whether you\u2019ll be a good fit for certain financial products like:<\/p>\n There\u2019s no one-size-fits-all answer, unfortunately. It really does depend on your age, lifestyle and financial goals. A 30-year-old saving for their first home, for example, will have a lower net worth than someone approaching retirement who has multiple investment properties.<\/p>\n Bear in mind that while net worth can give you a decent snapshot of your overall financial position, it doesn\u2019t account for liquidity (availability of cash) or your future earning potential. For example, owning a valuable property doesn\u2019t help with immediate expenses if the funds are tied up in equity.<\/p>\n Improving your net worth isn\u2019t about overnight changes. Instead, it\u2019s about consistently making smart financial decisions that line up with your long-term goals.<\/p>\n [\/et_pb_text][et_pb_text admin_label=”Related terms” _builder_version=”4.27.4″ header_2_font_size=”32px” header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” locked=”off” global_colors_info=”{}”]<\/p>\n See related terms<\/strong> <\/p>\n [\/et_pb_text][ba_social_share icon_bg=”#03002e” icon_padding=”10px|12px|10px|12px|true|true” layout=”classic” show_text=”off” btn_padding=”0px|0px|0px|0px|false|false” btn_bg_color=”RGBA(255,255,255,0)” _builder_version=”4.23″ _module_preset=”default” custom_margin=”50px||||false|false” custom_padding=”25px||||false|false” custom_css_before=” content: %22SHARE THIS%22;|| font-size: 16px;|| font-weight: 700;|| line-height: 22px;|| letter-spacing: 0em;|| text-align: center;|| color: #ff5447;|| margin-bottom: 10px;|| display: inline-flex;|| position: absolute;|| margin-top: 10px;” border_width_top_main=”1px” border_color_top_main=”#e4e4e4″ border_radii_icon=”on|5px|5px|5px|5px” global_colors_info=”{}” custom_css_before_last_edited=”off|desktop”][ba_social_share_child _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”facebook” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”linkedin” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”email” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][\/ba_social_share][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":" Net worth is a fundamental measure of an individual\u2019s or a business\u2019s financial health because it represents the difference between the total assets you own and the total liabilities or debts you owe. In simpler terms, think of it like a snapshot of your current financial position. For individuals, knowing your net worth is a […]<\/p>\n","protected":false},"author":35,"featured_media":0,"menu_order":0,"template":"","format":"standard","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"","inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"","footnotes":""},"class_list":["post-287836","glo","type-glo","status-publish","format-standard","hentry"],"yoast_head":"\nAssets<\/em><\/h3>\n
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Liabilities<\/em><\/h3>\n
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Positive vs. Negative net worth<\/h2>\n
4 reasons why knowing your net worth is important<\/h2>\n
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Tools for calculating net worth<\/h2>\n
How to improve your net worth<\/h2>\n
Net worth and financial products<\/h2>\n
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What is a good net worth?<\/h2>\n
What is gross profit?<\/a>
What is net profit?<\/a>
Gross profit vs. net profit (comparison)<\/a><\/p>\n