Track Your Net Worth With These Simple Steps
If you want a readily available snapshot of your overall financial outlook, get into the habit of
tracking your net worth. This number represents the value of your current assets minus your
current debts. Knowing your net worth gives you a bird's-eye view of your economic health and provides insight about how you can improve. When your net worth increases over time, it's an indication of smart savings and investment practices. Decreasing net worth is a sign that you spend more than you earn. Here's how to start tracking this key metric to pave the way for a sunny financial future and make progress toward your goals.
Document Your Assets
First, make a comprehensive list of all your assets. This list should indicate the value of all
substantial property, including but not limited to:
• Cash on hand
• Savings accounts
• Investment accounts
• Retirement accounts
• Real estate
• Precious metals
• Cash value of insurance policies
Add these numbers together to get the total value of your assets. If you have a complicated
portfolio that includes valuable items such as real estate, art and business holdings, you may
want to seek the advice of a professional appraiser who specializes in the assets in question.
List Your Debts
Next, you'll need to create a complete list of your debts. Don't forget to include the balances of:
• Auto loans
• Student loans
• Personal loans
• Credit card accounts
• Medical debt
• Revolving debt accounts
• Secured and unsecured debts
Tabulate the total amount of your debts by adding all balances.
Evaluate Over Time
It's the moment of truth. Subtract your total debts from your total assets. If you end up with a positive number, you have a positive net worth. You own more than you owe. A negative number indicates that your debts exceed the value of your assets.
Traditionally, I've used a good old Excel spreadsheet to keep my net worth up to date. Depending on the level of your computer skills, you can create a formula in which you can update the numbers above to get an instant update of your net worth. Then, you can use that formula to visualize how your net worth changes each quarter, month or even week.
If you calculate your net worth by hand, you can still use Excel to track the number over time.
Simply make a column with the date of your net worth calculation and another column with the calculation itself. Update your numbers as often as you like. When you want to view it as a line graph, select the data you want to include. Then, click Insert, then Charts, followed by the Line Graph button.
You'll be able to see how fast your net worth increases thanks to your hard work. If you prefer a plug-and-play solution, you can download countless apps that instantly calculate your net worth. However, all programs are not created equal, especially when it comes to protecting your sensitive financial data.
While it may seem like it takes a long time to change your net worth for the better, remember that slow and steady wins the race when it comes to finances.