It provides a benchmark about how well you are doing. Take a freshly-minted college graduate saddled with student loans. Their net worth is probably negative. They land a job that pays well. They buy a new car, loads of consumer items, maybe even a new home or condo.
Current income is enough to pay the bills, but that s about it.
Unless they ve made a concerted effort to pay extra toward the student loans, they still have a negative net worth. In fact, the car and house have added to that negative picture. If they aren t salting away much money in savings and investing, their overall financial health isn t as sound as their regular income would make it appear. This column is produced by the Financial Planning Association, the membership organization for the financial planning community.