Is tracking your net worth the most important part of your financial plan?
Lot’s of people say it is.
Tracking your net worth lets you know if you are moving in the right direction.
Chances are you’ve done some or all of the following:
- Paid down (or off!) debt
- Worked a monthly budget
- Tried your best to save and invest
- Worked hard
How do you know if all these thousands of decisions and actions are paying off?
Answer: Track your net worth!!!
Here’s what happens when you start tracking your net worth.
I reached out to a few of my favorite peeps on the World Wide Web and asked them how it felt before and after they started tracking their net worth.
Drink in these answers and let the glory flow all over your finger tips and eye balls and into your brain/mind/heart!
Tracking my net worth really helped put our finances into perspective. While we were already saving when I started, tracking really gave us the incentive to save even more and watch that number grow. It was at this point that we started increasing the retirement contributions each year to the point that we now max out our tax advantaged accounts. -Amanda from Centsiblyrich
(Should probably take this advice from someone who is worth 1.7 MILLION… ) Tracking your net worth is critical to growing one’s assets. If you don’t know where you’re at, how can you know where you’re headed? It also provides motivation (positive and negative) to see your growth or decline. Ideally you build some growth momentum and ride it forward. -Michael from FinanciallyAlert
It was the one thing that motivated me to actually start changing my actions because I knew that every move I made from that point forward would be reflected in my wealth. Tracking my net worth was a complete game changer for me. – J$ from Rockstar Finance (Might want to also check out this HUGE list of people who track and post their money publicly.)
It’s a great way to visualize the fact that all of the “little” decisions you make throughout the year do, in fact, lead to wealth creation. – The Retirement Manifesto
I was almost 500k in mortgage debt, slowly losing my “retirement plan” rentals to short sales, and in the process of a divorce… I was at my physical and emotional bottom. Tracking my net worth was my checks and balance to prove to myself I would survive it. Every month seeing those numbers go up – even if it was just $100 – gave me motivation to continue moving forward. I have seen my net worth grow exponentially. When I started tracking my expenses on top of the assets, I was able to cut in areas I didn’t even realize were a problem…mainly Whole Foods and wine soaked lunches with the ladies (I was fancy!). Since then I have worked to push the gap between income and expenses by working 40% more and spending less (I buy boxed wine now!). This year I am averaging a 75% savings rate. I would not have had the motivation if I didn’t have my nifty spreadsheet to see it all there in black and white…and blue, green, red, and purple. –Miss Mazuma
(Did you catch the 75% savings rate on that last one!!?? Whoa! Maybe there’s something to this tracking your net worth stuff!!??)
I’m convinced, how do I join this amazing club of net worth tracking rockstars?
How to track your net worth
Add up all your assets, subtract all your debts. Boom there’s your net worth.
It’s really that simple.
Assets – Debts = Net Worth.
So, are we done here?
Let’s talk a little more.
What if my net worth is negative?
There are tons of people out there tracking and watching their negative net worth move in the right direction.
Think of it this way… If a person with a negative net worth makes $400 progress this month and a person with a positive net worth makes $400 progress, IT’S THE SAME THING!
Progress is progress!
Tracking your net worth while it’s negative could be just the thing you need to start making more progress in the right direction.
Do not wait until your net worth is positive to start tracking it.
Don’t be scared, embarrassed or discouraged by a negative net worth.
Do it now.
Tracking your net worth validates everything else you are doing to make progress with your money.
Not tracking your net worth would be like running the football all the way across the field and then not taking it in for a touch down. (Only a bozo would do that! You’re not a bozo are you? 😉 )
Calculating your net worth brings everything into focus and breaks your entire financial situation down to just one easy to understand number.
Let us know how you felt before and after you started tracking your net worth!
Leave a comment here or join the discussion over in the How Do I Money Facebook group.