Net worth: the number that shows your financial health

Your account balance tells you how much you can spend today. Your net worth tells you where you stand overall: everything you own, minus everything you owe. It is the most honest snapshot of your finances, and working it out takes less than half an hour.

What you own: assets

Group your assets into four types:

• Liquid assets: current accounts, savings accounts and money you can use within a few days.
• Property: your home or other real estate, at what it would sell for today.
• Personal possessions: car, appliances, equipment. Count their current value, not what you paid: a five-year-old car is worth far less than it cost.
• Investments: funds, shares, bonds and pension plans, at their value on the day you calculate.

What you owe: liabilities

Separate short-term debts, due within the next year (credit card balance, overdue bills, small loans), from long-term ones (mortgage, car loan, student loan). Count only what you owe today: the outstanding balance, not the interest you will still pay.

The calculation

Net worth = assets − liabilities.

Example: €1,200 in a current account, €3,000 of savings, a car worth €6,000 and €2,500 in a fund add up to €12,700 of assets. With €400 on a credit card and €4,800 still owed on the car, liabilities are €5,200. Net worth is €7,500.

How to read the result

A negative figure is no reason to panic, especially early in your working life, with a student loan or a recent mortgage. What matters is the trend: if the number rises every time you calculate it, you are on the right track. Redo it every three or six months.

Watch your liquidity too. You can have a high net worth and still be unable to pay your bills if almost everything is tied up in a house or an investment that is hard to sell. When debts falling due exceed the money available, you have a solvency problem, even with a positive net worth.

Four ways to grow it

1. Save more: every euro saved increases your assets.
2. Spend less: lower expenses leave more room to save or pay down debt.
3. Grow what you own: investments that rise in value and possessions kept in good condition.
4. Pay off debt: every euro repaid reduces your liabilities, starting with the highest-interest debt.

Tracking it without effort

Net worth is not money to spend. It is an indicator that shows whether your day-to-day decisions are working. In FinanceFlow, the dashboard shows how your balance evolves and, on the Premium plan, the investment tracker keeps the current value of each holding and works out the return of each one and of the whole portfolio, which makes this calculation easier to keep up to date.