What is net worth?
Net worth is what you own minus what you owe, giving one number for your overall financial position.
Net worth is the total value of everything a person or household owns, minus everything it owes. It is a single number that summarises overall financial position at a point in time.
The two sides
On one side are assets: investments, bank balances, property, retirement accounts, gold, and other things of value. On the other side are liabilities: home loans, car loans, personal loans, credit card balances and any other money owed. Subtract the second total from the first and the result is net worth.
What the number tells you
Net worth can be positive or negative, and it moves for several reasons. Saving more raises it. Paying down a loan raises it, because a liability shrinks. A fall in the value of an asset lowers it. Because loans and assets are netted off, two households with the same investments can have very different net worth if one carries a large loan.
Common sources of confusion
- Valuation. Property and some other assets have no daily price, so their value is an estimate that changes only when it is updated.
- Liquidity. Net worth counts everything, whether or not it can be turned into cash quickly. A large net worth held mostly in property says little about money available next month.
- Counting twice. If a property is counted as an asset and its loan is counted separately as a liability, both belong in the calculation, but the same value is entered only once.
How Mandala shows this
Mandala combines the managed investment portfolio with the assets and liabilities entered on the Balance Sheet, such as property, deposits and loans, and shows the total minus the liabilities. Real estate entered as a full holding can be included or left out of the totals, depending on a setting for that client. The view keeps assets and liabilities visible side by side, so changes in either one are easy to trace.
Using it as a reference point
Net worth is most informative as a figure tracked over time, not as a verdict at a single moment. Looking at how it has changed between dates, and what drove the change, gives more information than the number alone.
See it live in Mandala
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Educational content only, not investment advice. Examples are illustrative, and nothing here is a recommendation to buy, sell or hold any product. Investments are subject to market risks.