Why You Should Be Tracking Your Net Worth
What story is your net worth telling? Do you even know?
For most people, juggling work, family, and everyday life leaves little time to focus on their finances. Does this sound familiar?
Let’s talk about why you should start regularly checking in with yourself and how to do it.
Tracking your net worth might not sound glamorous, but it’s a great way to begin to take control of your finances and watch your financial story unfold. Here’s how to get started and make it an exciting part of your life.
The Benefits of Net Worth Tracking
Net worth tracking isn’t just about the numbers—it’s about clarity, control, and progress. Here are the key benefits:
Snapshot of Financial Health: Understand exactly where you stand by subtracting your liabilities from your assets. It’s your personal financial scorecard.
Motivation to Improve: Watching your net worth grow over time can be deeply rewarding and encourage you to stick to your financial goals.
Early Warning System: Spot trouble areas, like rising debt or dwindling savings, before they become bigger problems.
Goal Alignment: Ensure your financial habits align with your long-term goals, whether that’s buying a house, retiring early, or traveling the world.
Tips for Making Net Worth Tracking Fun and Effective
To get the most out of net worth tracking, try these strategies:
1. Gamify the Process - Treat tracking your net worth like a game. Set milestones and reward yourself responsibly when you achieve them. For example, celebrate when you hit your first $100,000 in investments or pay off a significant debt.
2. Use Visuals - Create colorful charts or online dashboards to help visualize your progress. Watching the lines and bars move up over time can make tracking your finances feel like leveling up in a game.
3. Automate the Math - Use a net worth tracking app or spreadsheet to simplify the process. Many apps can link directly to your accounts, updating your data in real-time.
4. Turn It Into a Ritual - Make net worth tracking a monthly tradition. Pair it with something enjoyable, like sipping your favorite coffee or listening to a great playlist. This will help you look forward to the process.
5. Celebrate the Wins - Whether it’s paying off a credit card or hitting a savings goal, take time to acknowledge your achievements. Positive reinforcement goes a long way.
6. Learn from the Lows - Dips in your net worth are normal. Use these moments to analyze what happened and adjust your strategy. For example, if your investments drop in value, it might be a good time to review your asset allocation.
Real-World Example
Let’s say you decide to start tracking your net worth this year. Here’s how it might play out:
Your Assets ($915,000):
$50,000 in savings
$250,000 in investments
$600,000 home
$15,000 car.
Your Liabilities ($315,000):
$10,000 in student loans
$5,000 car loan
$300,000 mortgage.
Your Current Net Worth = $600,000.
Pretty easy, right! Fast forward a year: You’ve paid off $17,000 off your mortgage and have accumulated an additional $23,000 in your investments. Your net worth is now $640,000.
Watching your progress is not only satisfying but also motivates you to keep going.
How and Where to Start:
Ready to start tracking?
I recommend tracking either once or twice a year. Too often and you’ll become obsessive with what the numbers are saying, and with fluctuations in the stock market in the short-term, the numbers won’t tell a very meaningful story using shorter intervals.
Here are three ways to get started:
1) The Good ‘Ol Fashioned Way:
You can use an Excel spreadsheet that you update over time. It might look something like this:
Here are some downloadable templates that you might consider using.
2) Online Net Worth Tracker:
My two favorite options are Empower’s Personal Dashboard and Monarch Money.
Have any questions about what you’ve read? Let’s talk about them!
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