Why Net Worth Matters for Financial Health
The Number Most People Miss
When we talk about money, income usually gets all the attention — your salary, your monthly take‑home, even your bonuses. But there’s a clearer way to understand where you really stand financially: net worth.
Net worth gives you a snapshot of your entire financial health by comparing what you own (assets) against what you owe (liabilities) — and it can be far more important than how much you earn each month or year. (Source: Investopedia)
What Is Net Worth and Why It Matters
A Simple Formula with Big Insight
Calculating net worth doesn’t require complex spreadsheets:
Net Worth = Assets − Liabilities
Assets include things like savings, investments, property, and cash. Liabilities include credit card debt, loans, mortgages — everything you owe.
Understanding this number helps you see your full financial picture rather than just a slice of it. Income tells you what came in this month; net worth tells you where you’re headed financially. (Source:Investopedia)
Levels of Wealth in Australia
Here’s a current video that explains what different levels of wealth look like in Australia — including how income, superannuation, property equity, and net worth stack up across wealth tiers:
Net Worth vs. Income: What’s the Difference?
Most people assess their financial status based on income alone. But income isn’t enough to understand your financial health — it doesn’t factor in debt, major expenses, or how decisions today affect your future. (Source: CNBC)
Net worth accounts for all of that, showing you progress (or challenges) in your long‑term financial journey. This perspective better supports planning for big goals like buying a home, preparing for retirement, or starting a business. (Source:The National)
How to Improve Your Net Worth
Here are practical and actionable ways you can work toward a stronger financial position:
1. Track It Regularly
Record your net worth every month or quarter. This simple habit builds awareness and motivates intentional financial decisions.
2. Reduce Liabilities
Pay off high‑interest debts first, like credit cards or personal loans. Lower debts improve cash flow and your net worth directly.
3. Grow Your Assets
Increase savings and invest in diversified vehicles like index funds, retirement accounts, or even small business ventures.
4. Protect What You Have
Build an emergency fund — ideally 3–6 months of expenses — to prevent setbacks from unexpected costs.
5. Be Patient and Consistent
Improvement doesn’t happen overnight. Small progress on debt and saving consistently can compound over years — echoing My Money Medic’s theme: 1% Better, Every Day.
Tips: Make Net Worth Work for You
- Keep a simple spreadsheet listing monthly asset and liability updates.
- Reassess values annually for property, investments, and business assets.
- Focus on habits, not perfection — small improvements add up.
- Celebrate progress when net worth grows, even if by small amounts.
Final Thoughts
Your net worth isn’t just a number — it’s a compass that guides your financial decisions. Understanding where you are gives you clarity to plan where you want to go.
Remember: net worth isn’t about judging your success — it’s about informing your next step. When you track it consistently and act with intention, you set yourself up for long‑term financial growth, stability, and peace of mind.
Stay curious. Stay consistent. Get 1% better every day.
