Over the years, a culture has been created around the net worth of celebrities and the elite in our society. The addition of new members to the Forbes list creates a lot of hype on social media. There have also been scandals involving celebrities falsifying their net worth. So, what really is net worth and why is it so important?
Net worth refers to the value of the assets a person or corporation owns, minus the liabilities they owe. It is a metric for measuring a person’s wealth. In finance, the net worth of a business is the shareholder’s equity. In the calculation of net worth, assets are items owned by an individual that have monetary value. Liabilities, on the other hand, are obligations that deplete the individual’s resources.
Society commonly associates net worth with something positive. However, the fact remains that an individual or a business can also have a negative net worth. Positive net worth exists when an individual’s assets exceed their liabilities, while negative net worth exists when an individual’s liabilities exceed their total assets.
Now that we know to calculate our net worth, let explore the different categories of net worth we have:
- The ‘Affluent Individuals’ comprising individuals with a net worth of less than $1million but more than $100,000. A lot of middle-class working individuals fall within this category.
- The ‘High-Net-Worth Individuals’ (HNWI) who are people are with a net worth between $1 million and $5million.
- The ‘Very-High-Net-Worth Individuals’ (VHNWI) comprising individuals with a net worth between $5million and $30million.
- The highest category, the ‘Ultra-High-Net-Worth Individuals’ (UHNWI), comprises individuals with a net worth above $30 million. This category holds the world’s billionaires. According to the World Ultra Wealth Report (2021), there are 295,450 people that fall within this category which accounts for $35.5 trillion dollars of the world’s wealth.
We hope we have been able to shed some light on what net worth really means. Please share with friends and families, drop your comments in the comment box, and engage with us via our social media platforms @ broadstreetfinancialreview on Facebook, Instagram and LinkedIn; @ broadstreet_fin on Twitter.
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REFERENCES
Dimitropoulou, A. (2020, February 12). Types Of Rich People: Understanding The Classification Of Wealthy Individuals. CEOWORLD Magazine. https://ceoworld.biz/2019/12/31/types-of-rich-people-understanding-the-classification-of-wealthy-individuals/#:%7E:text=High%2Dnet%2Dworth%20individuals%20(HNWIs)%20(net%20worth,worth%20%241%20billion%20or%20more)
Ganti, A. (2021, February 11). Net Worth. Investopedia. https://www.investopedia.com/terms/n/networth.asp Wealth-X. (n.d.). World Ultra Wealth Report 2021. Retrieved September 16, 2021, from https://go.wealthx.com/world-ultra-wealth-report-2021
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