Your overall picture of wealth is never quite as simple as what your bank balance reads. Net worth is calculated by the amount your assets exceed your liabilities. In other words, net worth is the contrast between what you own and what you owe.
It is important to know where you stand with assets and liabilities when investing. If you have more liabilities than assets it might be worth paying off your liabilities before making an investment. You don’t want to end up in a position where you think you’ve got success with an investment earning 5% growth, when in fact you’ve got credit card debt costing you 10%.
If you don’t have a grip on your overall financial health, then liabilities like debt could nullify your investment growth. Credit cards and loans can be expensive and you should consider making overpayments before investing.
The best way to avoid this pitfall is to list all of your liabilities. At the same time, list all of your assets. Take a total view of your financial well-being.
The positive thing about assets is these work alongside your investment to hopefully make you richer. For example, if you have bought a house, then just like an investment portfolio there’s a chance that it will appreciate in value over time. That’s why you need to consider assets alongside investments, as selling a house on a profit and downsizing can be a way of funding retirement as well as a pension.
You should check in on this overview regularly, making any necessary changes. This way you can be confident where you stand with your wealth, and what you have to do with your goals to get to the level of wealth you desire.
You can update your assets and liabilities in the True Potential app. We’ve talked about the importance of logging in regularly, and you should also update these assets and liabilities regularly. Our award-winning technology will calculate your total balance, giving you an overall picture of wealth.
To recap:
- Knowing your assets and liabilities gives you an idea of your net worth, the difference between what you own and what you owe.
- If you have more liabilities than assets then consider how to deal with these. Paying off debt means it won’t undermine your investment returns.
- Assets such as property work alongside your financial investments to give you a future source of wealth.
- Log in today and check back regularly to see where your wealth is in relation to your goals
Please be aware that this communication should not be considered financial advice.
< Back to Blog