Why Knowing Your Net Worth Is Important

Determine your target net worth - where you want to be in the near-term and long-term future.

The following formula is helpful:

Target Net Worth=[Your Age−25]∗[1/5∗Gross Annual Income]

A 50-year-old with a gross annual income of $75,000 might aim for a net worth of $375,000 ([50 - 25 = 25] x [$75,000 ÷ 5 = $15,000])
Your net worth can be much more or much less than the amount indicated by the guideline.

It can help you to determine when you are and how to get where you want to be.

• You can identify areas where you spend too much money. Do you need it or merely want it?
• Pay Down Debt. You can develop a plan for paying down debt.
• Your net worth figures can motivate you to save and invest money.