The unimportance of knowing one’s net worth

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The net worth of an individual is simply the sum of all usable assets after deducting liabilities. If you search for ‘net worth’ and ‘importance’ in Google, you will find several articles which talk about, how determining and regularly monitoring net worth are important indicators of financial health.

Suppose I estimate my net worth to be about 5 Lakhs, does it say anything about my financial health? I could have all that money in a SB account and claim my net worth is growing each month after I get a pay check.

If the only financial goal for a person is retirement, then tracking net worth makes sense.  This is because the retirement corpus is the net worth. Many of us have multiple long term goals (children’s education, marriage and other goals besides retirement). Under such circumstances it is meaningless to track individual net worth.


When we sit down to draw up a financial plan, listing our assets and liabilities may help provide a sense of perspective. After that it is all about tracking the progress of our investments for specific financial goals.

Let us ask ourselves the following specific questions:

  • If you retire today how long will your retirement corpus last? You will need to compare the answer with the number of years you expect to work
  • Pattu: About 8 years or so.  Since I have (technically) another 26 year of service, this number is not that bad (80% of my NPS corpus will be annuitized if I retire today. So I am assured of ‘some’ income all my life).
  • How about you? Strongly recommend everyone to do this exercise. You can use this, ‘How long will my money last?’ calculator to answer this (see bottom of the linked page). For those interested, other types of annuity calculators can also be found there.
  • If your child were to go to college today, what course will you be able to afford, assuming (1) you do not touch your retirement corpus and (2) you do not get an educational loan
  • Pattu:  My son is 3.5 years old. Today I can enrol him in an expensive engineering college (expensive but not necessarily competent! Competent ones are usually cheaper!). I started investing a couple of months before he was born.
  • If we should invest as much as we spend for retirement, I think, we should invest at least one third of this for each child’s education. I am determined that my son should start his life without the burden of an educational loan.
  • How about you? If you have two children you will need to ask and answer this question for each child.
  • Use this Comprehensive Child Planner to plan for your children’s education.
  • A similar question should also be asked for your child’s marriage (if you think it is important for you to invest for this. The goal is to avoid touching your retirement savings for this)
  • Pattu: I think I will have enough to fund his marriage by the time he is legally eligible! ‘Enough’ here again implies I don’t touch my retirement corpus.
  • The average age for sexual ‘awakening’ is constantly decreasing in India. Taking into account our cultural ethos, it is best to prepare for the possibility that our children may not be able to fund their own marriage!
  •  I am done with my long term goals. If you have any more, you will need to ask  similar questions regarding these.

 Note: I am sharing information about my fiscal health in the hope that it might provide a sense of perspective on what is important and why. I think this is better than preaching. I have no intention to brag.

Use an Excel file or any other tool to fill the answer to these questions each month. You will still be tracking net worth -not  your net worth but that of each long term goal.

What do you think?

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About the Author M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the author and owner of  He is an associate professor at the Indian Institute of Technology, Madras since Aug 2006. Pattu” as he is popularly known, has co-authored two print-books, You can be rich too with goal based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management.  He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. Pattu publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year (2.5 million page views) with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis. He conducts free money management sessions for corporates  and associations(see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. Contact information: freefincal {at} Gmail {dot} com (sponsored posts or paid collaborations will not be entertained)
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  1. People are too much fascinated about short term things & lose the bigger picture. You rightly said, day to day tracking of one’s own net-worth does not make any sense.



    1. Yes keeping the big picture in mind is always important. My point here is that the concept of net worth itself makes no sense when one has many long term goals.

  2. Financial health is more important than one’s own net worth. Nicely explained the importance or long term goals.It’s necessary to ask such question to ourself time to time to keep motivated 🙂

  3. recently ( too late!) i read Robert Kiyosaki’s ‘Rich Dad Poor Dad’ and come across defination of net worth by Buckminster Fuller. that Wealth is a person’s ability to survive so many number of days forward… or if I stopped working today, how long could I survive? just for supplement!

  4. I am a senior citizen with NO Govt pension.I have invested in FD,s,Mutual Funds, Stocks,NCD,and Annuity schemes. I do not have any liabilities.No specific goals to achieve except that the income I get out of these investments will be sufficient to meet
    1.Monthly expenses
    2.Major repairs to my residence which I own and where I live
    3.Any other unanticipated expense
    4. Major medical expense over and above my Med Insurance
    5.Savings which I have to make to meet inflation.
    I do a monthly review of my portfolio and find the market value and list it out.
    Do you recommend I should stop doing this?

    1. Please continue doing this. What I have written applies only for some one young/middle aged with multiple long term goals. For you, your corpus is your financial net worth. Monitoring its growth each month is a pretty healthy thing to do. What you state is inspiring for younger people. Thank you.

  5. Very true. I can feel it in my case. Not that my networth is good, no, its not, but 'on paper' everything looks rosy: a reasonably good annuity protected (pre-NPS era) central govt. governed salary, reasonably sized independent house, car…etc….with a meager looking EMI (only for housing loan, car loan over)….BUT, looking at the 'bigger picture' gives shivering down the spine :). though we don't have any 'bad habits' of extravagant spending (like being lavish on cloths, dinning out frequently, drinking, smoking, other non-essential shopping, etc… nothing) except traveling by road (my only hobby which has severe potential to cut holes in pocket, hence have controlled it off late, as a big goal is approaching fast).

  6. Sir, I think we should plan for our kids education upto degree (BTech/MBBS/etc) only and let them manage on their own for studies abroad or MBA etc with loans in their names.

    Similarly, I think we should not fund sons' marriage expenses at all. For girls, after graduation, they need to be told to copay / save a chunk of their earnings for wedding expenses.

    Our own retirement funds are far more critical. Since kids may settle down, start earning well and not contribute anything back to us. I have seen high-income earning sons pushing their own expenses to parents (Expenses such as marriage, air-tickets for spouses, upanayana for thier kids etc)

    PS: I have son and I am firm on the above plan.

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