Your Net Worth is a summary of your assets and liabilities. It is a single number that reflects the value left after subtracting your liabilities from your assets. The average American carries 3 liabilities**. A liability would include any account that represents debt owed. An asset is any account which represents a value owned.
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Measuring your Net Worth allows you to benchmark your financial health. If your goal is to pay down debt or to save enough money to retire then this report will help. That’s because you can stay organized and see your big picture in a simple report.
You can calculate your Net Worth by subtracting your Liabilities from your Assets. Your liabilities include any debt which you owe such as:
Your assets should include accounts like:
To calculate your net worth you subtract the value of your liabilities from your assets. The amount left over is your Net Worth.
Pocket Plan offers a free Net Worth Calculator that can show your Net Worth in minutes. To get your Net Worth, simply create a Pocket Plan account, connect your financial accounts and view your report.
You can securely add as many accounts as you prefer. If you connect your financial accounts your data will be updated every time you login. This is helpful for protecting your accounts, measuring your performance and getting updates and suggestions.
If you prefer to add your accounts with manually input data, you have the option to do so.
Inflation and rising interest rates are putting pressure on asset values in 2022. That means that many assets have lost value over 22 as you can see in the financial performance of assets:
Your financial Net Worth is often used for lending decisions and conversations with professionals like your CPA or Estate Planner. A positive financial net worth indicates that you have accumulated more assets than liabilities. When this happens will vary based on your income, savings, investment performance and other factors, like taxes. However, at a minimum, your net worth should grow at the pace of inflation.
In order to increase your personal net worth, you’ll want to be mindful of which assets you’re building and how much you are saving for them. These factors are typically decided by your budget or cash flow. However, if you receive a lump sum settlement, bonus from your job or inheritance then you may see a large increase in your Net Worth.
In order to have confidence that you’ll never outlive your money, experts suggest that you will need a net worth that is equal to or greater than 5 – 15 times your annual cash flow. Basically, if your assets are worth more than 5 – 15x what you spend each year, then odds are favorable that you will not outlive your money. Individual factors will influence how much you need to save and how long that money will last. However, many retirement income strategies, like the 4% rule are based on taking a set percentage of your total assets, which can be found on your Net Worth statement.
Retirees should update their Net Worth Annually. For more information visit our knowledge base here.
Disclaimer: Pocket Plan and Pocket Planner Inc don’t offer financial, tax, investment or legal advice. Future outcomes are for illustrative purposes only. Contact a financial professional before taking action.
This site may contain forward-looking statements relating to the objectives, opportunities, and the future performance of the U.S. market generally. Forward-looking statements may be identified by the use of such words as; “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of any particular investment strategy. All are subject to various factors, including, but not limited to general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors affecting a portfolio’s operations that could cause actual results to differ materially from projected results. Such statements are forward-looking in nature and involve a number of known and unknown risks, uncertainties and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Prospective investors are cautioned not to place undue reliance on any forward-looking statements or examples. None of Pocket Planner Inc’s or any of its affiliates or principals nor any other individual or entity assumes any obligation to update any forward-looking statements as a result of new information, subsequent events or any other circumstances. All statements made herein speak only as of the date that they were made.
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