YOUR NET WORTH = WHAT YOU HAVE – WHAT YOU OWE
It’s that simple.
A few times a year, I take a moment to calculate my net worth. I pull up my spreadsheet, log into my accounts online, and enter the balance of each of my retirement accounts, savings, investments, etc. I don’t own a home, but if you do, make sure to include its approximate value.
Then I enter any debt that I have. For you, that might include a car or student loan, a mortgage, credit card debt, or something else.
Finally, I take m assets minus my liabilities and… ta-da! That’s my net worth!
Find Out Where You Are, So You Know Where You Want to Go
I started tracking my net worth in my mid-20s, and I used to track it monthly. Now, I review net worth twice a year with my clients, usually at the beginning of the year and at least halfway through the year.
Whatever schedule you choose, tracking your net worth is an important step to take. If you don’t know what your net worth is today, how will you be able to tell if it’s increasing or decreasing?
Put It On One Page
Too many people don’t have any clue what their net worth is because they haven’t seen everything on one page. Even if you’re tracking your money in an online budgeting system, most people have at least one loan that doesn’t link or one account at a credit union that won’t sync. Most of us have dozens of accounts and have never seen everything on one page.
This is why tracking your net worth is so important: it gives you a good overview of not just how much debt you have, but also how much your investments have changed and how much your savings has grown. I believe your net worth is one of the most important numbers in financial planning.
Many Factors Impact Your Net Worth
Paying down debt, building up savings, and the changing value of your investments can all affect your net worth. These three things can actually work together to grow your net worth exponentially. Sometimes we feel like we’re working so hard to pay down debt or max out our Roth IRAs that we forget how it impacts our bottom line. The good news is that both of those things can actually increase your net worth!
Ready to Try This On Your Own?
(Cue music to On My Own from Les Miz. The Lea Salonga version, of course. It’s the best! Take a moment to watch it. Seriously, amazing!)
Now that your musical interlude is over, it’s time to calculate your net worth! Here’s a spreadsheet from Money Under 30 to help you know where to start.
Do you have more assets than you thought? Was it scary to see all of your debt on one page? What can you to increase your net worth in the next few years? Connect with a financial planner to start improving your net worth today!