Net Worth Report
The formula for net worth/equity is assets less liabilities. The assets must be valued at market or realisable values.
Periodically calculating the net worth of an individual, family, or company has the following benefits:
- Provide a simple snapshot of their ‘true wealth’ at a given time.
- Eliminates ‘fake wealth’, i.e. assets purchased/funded via debt (liabilities). Debt financing only increases net worth when the assets grow in value, and the debt/liabilities fall.
- Annually measuring net worth indicates the growth in wealth over the last 12 months. One figure summarises what the previous 365 days of working, saving, investing, operating a business, etc., have translated into.
- Provides an anchor point to calculate the net worth targets/goals for the next 12 months, five years and ten years.
The 2019/20 Australian Bureau of Statistics (ABS) report on Household Income and Wealth in Australia disclosed:
- Average net worth for Australian households is $1.04 million.
- Average disposable household income was $56,448 pa.
- 75% of households have debt. Of these households, 30% were servicing a total debt three or more times their annualised disposable income.
- Median family net worth is $579,200.
"You’d be stupid not to try to cut your tax bill and those that don’t are stupid in business"
- Bono: U2