Net worth

Tuesday, 22 Sep 2020

According to the Australian Bureau of Statistics (ABS) the median (middle value of the sample) Australian household net worth was $558,900 in 2017-18. An increase of $106,800 from 2005-06, and an increase of $12,400 from 2015-16.

Note: The median is more useful here as a few very high net worth households drastically impact these statistics. For example, the mean (average) Australian household net worth for 2017-18 is $1,022,200. That’s ~83% higher.

What is net worth & why should I care?

Net worth is the grand sum of your individual or household’s financial position. Simply add up all of your assets (including Superannuation) and subtract all of your liabilities to calculate your net worth.

If you are part of the Financial Independence/Retire Early (FIRE) community you may perform an altered calculation by removing the Superannuation element from the calculation as this provides you a view of your accessible net worth.

Calculating your net worth on a regular basis is an important tool in setting yourself up for financial wellbeing in the future. Plus it is really quick and easy to do!

The two near-immediate benefits include:

  1. Gain actionable insights into your financial position
  2. Seeing the hard figures helps keep you motivated and focused during the “long grind” of your work life

Also, measuring something is the first step towards improving it!

When should I do this?

Right now!

I personally calculate my household net worth at the end of each month and encourage you to do the same. However you can do it on a less frequent basis (e.g. quarterly or annually) if you prefer.

It takes a few periods (~3) before you get to see the meaningful outcomes but it is super motivating once you do! You get to witness the fruits of your labor as well as the power of compound interest!

OK, how do I do it?

It really is as simple as I said before. Log into all of your financial providers and jot down the balances as of now in a spreadsheet (Google Sheets or Excel). To make your life easier, I’ve prepared a simple net worth tracking sheet that you can copy and get started on right away.

Collect the current balances for any/all of the below that you have:

  • Savings accounts (A)
  • Spending accounts (A)
  • Superannuation accounts (A)
  • Brokerage cash accounts (A)
  • Share holdings (A)
  • Crypto holdings (A)
  • Credit cards (L)
  • Mortgage offset accounts (A)
  • Mortgage accounts (L)
  • Student loans (L)
  • Buy now, pay later ala Zip/Afterpay (L)

Now just add all the (A)‘s and subtract all the (L)‘s.

Ok, now what?

As previously mentioned, do this each month (or whatever frequency you prefer).

After ~3 periods you will have enough data to be able to start identifying improvement opportunities. Maybe you are spending too much, or maybe you have most of your net worth in cash rather than working for you. But these are the topics of future articles.

Good luck!