Nominal net worth is the number you see
If your net worth moves from €400,000 to €420,000, nominal growth is 5%. The calculation is correct, but it does not yet explain whether your financial power improved.
Real net worth adjusts for changing prices
Inflation means the same amount of money buys less over time. Real growth compares the change in your wealth with the change in the cost of living.
When wealth grows more slowly than prices, the number is higher but its purchasing power is lower.
Where shrinkflation fits
Some price change is hidden in smaller quantities or reduced product value rather than a higher sticker price. A real-term view can account for this broader erosion when measuring whether wealth is genuinely progressing.
Use both views
Nominal values remain useful for statements, liabilities and target amounts. Real values are better for evaluating long-term progress.
The honest interpretation often needs both: what the balance became, and what that balance can now do.
A practical example
Suppose net worth rises from €500,000 to €530,000 over twelve months. Nominal growth is 6%. If the relevant measure of price growth is 4%, real progress is roughly 2%, before considering the exact timing and methodology of the adjustment.
The household is richer in nominal terms and has probably gained purchasing power, but not by the full €30,000 suggested by the headline change.
Now consider a second year in which net worth rises by 3% while prices rise by 5%. The balance reaches a new record, yet real wealth moves backwards. Without both views, the record number can create false confidence.
Which inflation measure should you use?
No public index matches one household perfectly. A national consumer price index provides a consistent reference, while personal costs may move differently because of housing, childcare, travel or location.
Consistency is again more important than searching for a perfect measure. Use a disclosed source and understand it as a lens for purchasing power, not an exact personal invoice.
Separate real growth from portfolio performance
Inflation-adjusted net worth and investment return are related but different. Net worth includes contributions, debt repayment, property and other assets. Portfolio performance isolates what investments earned after accounting for deposits and withdrawals.
A strong financial review can therefore say: investments returned 7%, net worth grew 9% because you also saved, and real net worth grew 5% after price changes.
Frequently asked questions
Can real net worth be negative while nominal net worth grows?
Yes. That happens when the percentage increase in wealth is lower than the increase in relevant prices.
Should liabilities be adjusted for inflation?
The reported balance remains nominal. Inflation may reduce the real burden of fixed-rate debt over time, but the monthly amount owed does not change merely because prices rise.
Is shrinkflation already included in inflation?
Official methods attempt to account for quality and quantity changes, but the treatment varies. Hugo’s real-term methodology is designed to make this broader purchasing-power erosion visible rather than relying only on sticker-price movement.
For the calculation principles behind Hugo’s metrics, see Metrics & Methodology.