---
aliases: ["Net Worth"]
Is A: Measure
Belongs to: "[[responsibility-personal-finance]]"
Unit: "EUR"
---
# Net Worth

Net worth is the comprehensive measure of financial health for [[responsibility-personal-finance]]. It captures the cumulative effect of income growth, savings discipline, and investment returns in a single number. Tracking net worth monthly provides a long-term perspective that smooths out the noise of individual income or expense fluctuations.

For an indie business owner, net worth is particularly important because income is variable and there is no employer-provided safety net. A growing net worth trajectory indicates that the business is not only generating revenue but also building durable personal wealth.

## How it's tracked

Calculated monthly during the [[procedure-monthly-portfolio-review]]. Sum of all assets (bank accounts, investment portfolios, retirement accounts, real estate equity) minus all liabilities (mortgage, any outstanding debt). Crypto and illiquid assets are included at conservative market valuations. Logged in the financial tracking spreadsheet with month-end snapshots.

## Targets

- **Minimum**: Net worth should increase in at least 8 of 12 months in a given year. Negative months are expected (market corrections, large purchases) but should be the exception.
- **Target**: 15-20% year-over-year net worth growth, driven by a combination of business income, [[measure-savings-rate]], and market returns.
- **Stretch**: 25%+ year-over-year growth, achievable in strong market years combined with business revenue growth.

## Notes

- Net worth is a lagging indicator. It reflects decisions made months or years ago. Use it for long-term trend analysis, not short-term decision-making.
- The [[procedure-quarterly-financial-planning]] session is where net worth trends are reviewed and adjustments are made to savings and investment allocations.
- Business revenue growth ([[measure-sponsorship-mrr]]) is the largest controllable input to net worth. Market returns matter but are not controllable.
- Avoid over-indexing on month-to-month changes. Market volatility can swing net worth by 5-10% in a single month without reflecting any real change in financial behavior.
- Track separately from business revenue to maintain a clear boundary between personal and business finances. The business funds personal wealth via salary and distributions, but they are distinct.
