Net Worth: How Can You Determine Yours? – PillarWM
If you want to determine your financial value, you will need to calculate your net worth. Not only does it help you analyze your current financial situation, but it also allows you to create a financial plan by envisioning your future goals. Investors with an ultra-high net worth of over $10 million often enlist a professional financial advisor or a wealth manager’sservices. If you want to find the best ultra-high net worth financial advisor for yourself, our Ultimate guide can help you through the process.
STRATEGIES FOR FAMILIES WORTH $5 MILLION TO $500 MILLION
The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.
Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.
If you have a net worth between $5 million to $500 million in liquid investable assets, you will benefit from getting wealth management advice from our firm, Pillar Wealth Management. We understand the unique needs of affluent investors and are committed to help you achieve the future financial goals that you envision for yourself. Contact us if you would like to schedule a free consultation with one of our team’s expert wealth managers.
Table of Contents
What is Meant byNet Worth and Why is it Important to Know Yours?
Your net worth is essentially an overview of your financial health. It helps quantify the value of your financial and non-financial assets minus your liabilities. In this case, the assets include everything that you own, from your house, car, and jewelry to the cash in your bank account. Your liabilities would include any debt you have, for example, a student loan, a mortgage, or credit card debt.
In simple terms, your net worth is the amount of cash you would have on hand if you were to hypothetically sell everything you own and pay off your debts. In many cases, especially for college students and people who are just starting their businesses and careers, this value can be negative. This indicates that they own more in debt or loans than they own.
Although there is no universal standard that everyone should strive for, monitoring your net worth can give you more insight into where you stand financially. As you track your annual progress, you can see improvements or growth in your net worth. On the other hand, if you see it decreasing, you can adjust your budgeting or investments in a way that can turn that around. Many investors look for strategies that can improve their investment portfolio’s performance to give them more returns. Our Performance Guide discusses some of the strategies that can maximize your portfolio’s growth.
Having a clear picture of your financial worth in assets and liabilities can help you plan out your financial future and set out goals. A financial advisor can help you understand how you can manage your money to achieve those goals. If you’re thinking about hiring a financial advisor for the first time, you should read our Ultimate Guide to ensure that you make the best choice for your financial future.
How Can You Calculate Your Net Worth?
Now that you understand why you should be aware of your financial value, you might be wondering, “What is my net worth?” Calculating your net worth requires a few simple steps. You can calculate it yourself, or your financial advisor or financial planner can do it for you.
The advantage of having a financial planner or financial advisor is that they keep track of all the information pertaining to your financial assets and liabilities and regularly update it. Otherwise, gathering this information can be a tedious chore. Affluent investors with assets worth more than $10 million can hire a financial advisor to help them organize their finances. Our exclusive guide can help you identify the characteristics you should look for in your financial advisor.
Once you have the relevant data, you can use the following steps to determine your net worth.
1. Calculate the Value of All Your Assets
You can begin by listing the largest assets you have. This will include your house, any real estate properties you own, and vehicles such as cars or yachts. For entrepreneurs, this will also include your business’s value, which has to be calculated separately beforehand.
Your liquid assets come next. It would help if yougatherered the latest statements for your checking and saving accounts, retirement accounts, and any other investments you might have. Lastly, you should list any other valuable items in your possession, i.e., jewelry, antiques, collections, or heirlooms. When you add the value of all of the assets you listed, you will get a number representing your total assets.
2. Calculate the Value of All Your Liabilities
Just as in the previous step, you should begin by listing your largest liabilities, such as business loans, mortgages, etc. Next, add your personal liabilities to the list, including credit card debts, student loans, or any other amount you might owe. Be mindful of using the most current balances in order to get an accurate reading.
The added values of your listed liabilities will give you the worth of your total liabilities. As affluent investors, you might be unaware of many factors that put your wealth at risk. Our book, The Art of Protecting Ultra-High Net Worth Portfolios and Estates – Strategies for Families Worth $25 Million To $500 Million, can help you understand more about how to foresee these threats and safeguard your wealth.
3. Calculate Your Net Worth
In the last step, you subtract the value of your total liabilities from the value of your total assets. The formula used is:
Net Worth = Total Assets – Total Liabilities
Even if negative, the resulting number will give you starting point against which you can compare your future net worth values. Calculating your net worth once a year can help you determine if you are making progress in your financial life or if you are falling behind on your goals. In either case, you can make changes to your investment portfolio or budgeting plan to align with your goals.
How Can You Determine Your Financial Health?
Once you have a value representing your financial value, you might want to know how it compares to the average net worth. So, what is a good net worth at 40 years?
The Federal Reserve Board’s Survey of Consumer Finances report presented the average net worth figures for different age groups, which can vary with factors such as education, income, social status, and others. For individuals aged 35 to 44, the average net worth was $436,200, and for the age group of 45 to 54 years, it was $833,200. The value was observed to increase annually until well after the retirement age, after which it began to decline.
However, a high net worth does not always indicate a high standard of living unless you have a large number of liquid assets. Successful and affluent individuals can have a net worth that reaches millions in liquid assets.
Your net worth is not the ultimate arbiter of your financial success or failure since it can change with time. A negative net worth does not mean you have poor financial management skills or that you have a low personal value. It only helps you objectively analyze your financial situation for strengths and weaknesses. This allows you to create or adjust your financial goals accordingly. With the right steps, you can work towards increasing your net worth.
What is a High or Ultra High Net Worth?
If you have liquid assets that reach from approximately a million dollars up to 5 million dollars, you will be considered to have a high net worth.Usually, this value excludes any personal assets and residences.
If you are thinking, “Is a net worth of 30 million a lot?” then the answer is yes. Investors with more than $30 million in liquid assets are considered to be ultra-high net worth individuals. High net worth and ultra-high net worth individuals are in high demand by private wealth managers.
Wealth managers have the experience, qualification, and the tools to manage such a large sum of money, which can often be dispersed across multiple accounts or investment vehicles. Our wealth managers can help you achieve financial success with a customized plan to meet your unique needs. Book a meeting with us for your first consultation.
What to Do if You Have a High or Ultra High Net Worth?
Securing your wealth should be your first priority. You want to make sure that the money you earned or inherited will remain safe to support you through retirement and any other investment or business ventures that you hope to carry out.
Hire a financial advisor
If you’re new to the wealth management sector, you might be unaware of the threats that come with having a high or ultra-high net worth. Tax laws are amended, legislations are changed, interest rates are increased, and you are eventually left losing the money you gained before you’ve had a chance to enjoy it. In this case, a financial advisor or a wealth manager can help you.You can talk with one of our wealth managers to gain an insight into how financial advice can improve your life and money management skills.
A professional financial manager is skilled and qualified in providing concise and useful information to help you stay informed of all the factors that pose a risk to your wealth. Any wealthy individual is aware of how important it is to invest their assets in the appropriate vehicles, but determining which ones can be tedious. That is why many affluent investors consult wealth managers, who have the knowledge and experience of dealing with high-value assets. They can also help you make decisions regarding your retirement to make sure that you are able to maintain your standard of living.
Wealth managers can monitor your funds, evaluate growth rates, and manage risk to help safeguard your assets and enhance your wealth. They can use techniques and methods that can reduce your cost and taxes to mitigate your expenses and customize your portfolio to suit your financial profile. You can learn more about the shifts you can make to your portfolio to improve your performance in our 5 critical shifts guide.
Approaching a fiduciary financial advisor or a wealth manager is in the best interests of high net worth or ultra-high net worth individuals, as they are legally obliged to protect your wealth. They can provide you with advice and suggest solutions or strategies that help you meet your financial needs and goals.
Why You Should Hire Pillar Wealth Management
A high or ultra-high net worth requires more attention and care, which can be achieved at the hands of wealth managers. They can use your portfolio to help you reach your financial goals while safeguarding your assets.
Our firm has over six decades of experience in providing expert financial management advice to investors who have a high or ultra-high net worth of $5 million to $500 million in investable assets. If you recently acquired a large sum of wealth and are wondering how to go about your money management, our wealth managers can help you allocate it wisely and help secure your financial future. To book your very first free consultation, you can contact someone from our team.
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