Best Way to Track Your Net Worth

Almost two years ago I started tracking our net worth. I had seen many of my blogging friends track their net worth from month to month, and began to realize how beneficial it is to track. For those of you who aren’t currently tracking your net worth, odds are you are not doing it for one of two reasons:

  1. You don’t understand the benefits (or no one has told you it’s beneficial to track).
  2. You don’t have enough time or haven’t found the best and easiest way to do it.

Well, I’m here to change that. If you are not tracking your net worth, you need to start this instant. Actually, finish reading this post and then get started. Not only will tracking your net worth give you the most accurate metric to analyze your financial progress from month to month, but it will also push you to reach all of your financial goals as fast as you can.

Finance 101: How to Calculate Your Net Worth

For those who don’t know, you calculate your net worth by adding up all of your assets (valuables, like savings, retirement accounts, real estate, etc) and subtract all of your liabilities (debts) from that number. Here’s an example of how to do this calculation:

Savings: $30,000
Retirement Accounts: $40,000
Car Value: $5,000
Home Value: $100,000

Total Assets: $175,000

Home Mortgage: $70,000
Credit Card Debt: $2,000
Car Loan: $1,000

Total Liabilities: $73,000

Net Worth: $102,000

It really is that simple: (1) Add up your assets, (2) subtract your liabilities and you get your net worth.

Why Tracking Your Net Worth is Worth EVERY Second

I USED to think that tracking your net worth was for rich people. It was just something that older people did, or even people who were older and closer to retirement. I thought it was just one of those things that people with a large net worth used to brag.

Oh look at how BIG my net worth is and how awesome I am…blah…blah…blah.

This was before I opened my eyes to what retirement planning for young adults really was, of course. I really didn’t see a purpose of tracking my net worth.

Oh, boy, was I wrong.

My opinion changed when I started to understand what a net worth measures that other things do not. There are many metrics to track your success when it comes to personal finance, including but not limited to:

  • Income
  • Expenses
  • Savings (per month, year, etc.)
  • Value of home
  • Debt
  • Savings %

I could go on and on. The simple fact is that people find whichever of the above metrics that they are good at and highlight them. For example, I may say that I have absolutely no debt. No student loans, no car loans, absolutely no credit card debt, and no mortgage. On a surface level, you might say that I am in a better financial situation than someone who owes $400,000 on his home. But, when you look deeper (and consider the other metrics), you realize that his home is worth $1,000,000. In other words, he has $600,000 in equity in his home. It’s clear who has the advantage now.

What net worth does, as a metric, is to go beyond the surface level. It evaluates your entire financial progress. It doesn’t ignore one aspect. It considers the entire picture – or close to it. Your net worth, in and of itself, does not include how much more money you are capable of saving or your return on your investments, but if you track your net worth from month to month, you can get a pretty good picture of these other factors.

Simple put – Tracking your net worth gives you the most accurate picture of your complete financial health.

How to Track Your Net Worth

When I first started tracking my net worth, I was probably the worst example of someone tracking their net worth. My process was horrendous. Here’s what I did to track my net worth, play by play (please don’t laugh):

Step 1 – Open up my excel spreadsheet
Step 2 – Get on the internet, log in to first savings account. Look at account balance & record the value in the spreadsheet on the first row.
Step 3 – Go to the next financial account, record value in the next spreadsheet row.
Step 4 – Repeat, repeat, repeat, etc.

It literally took me half of an hour to even see how big or little my net worth was. WHAT?!

If you don’t read anything else in this post, please read this next sentence. Tracking your net worth should be easy, fast, simple. With technology where it is today, there is no excuse for you to manually log in to each account.

The Best Software to Track Your Net Worth

Several months ago I finally splurged and bought a $50 software to track my money. It’s probably the most reputable personal finance software that exists today – and it’s been around for years. I thought I couldn’t go wrong – well, I was wrong. But that was because I didn’t know that Personal Capital existed.

Personal Capital is an investment company that created a secure online money management tool. It allows you to create an secure (same level of security as online banks) account that automatically syncs with all of your other finance accounts. There’s no longer a need to log in to each account ever again.

personal-capital-net-worth

An inside look at my net worth chart in personal capital (with the numbers blacked out of course)

 

It allows you to not only track your net worth month to month, it also provides you with some basic tools to analyze your investment portfolio. Below is another view of the basic allocation tool, which helps you visualize your allocation. All of you investing wizards can try to guess my portfolio’s allocation, if you’d like.

personal-capital-allocation

The best part about Personal Capital? It’s absolutely FREE. No hidden fees, no requirement to enter your credit card information EVER. Personal Capital offers a valuable tool to customers with the hope that you will find one of their other products (that aren’t free) worthwhile. It’s a marketing strategy, but one which you can take advantage of without paying a cent. If you want to track your net worth in minutes, sign up for Personal Capital today.

Personal Capital

11 Responses to Best Way to Track Your Net Worth

  1. Micro says:

    I like Personal Capitals fee analyzer and it’s a little better for tracking investments than Mint is. Despite that though, I have stuck with Mint for tracking my net worth. Probably more so because it was the first program I started using so I have more history on there that I don’t want to lose.

    I do prefer tracking my net worth over just looking at how much debt I pay off every month because it’s more motivating. I may pay X amount off my debt but net worth will include how much I’m putting away in my 401k and IRA accounts. It gives me a much clearer picture of how much I am saving.

    • Corey says:

      Great point, Micro. Your Net worth also has the chance of going up significantly with a positive turn in the stock market. If you maintain a high savings rate, you can survive some of the worst stock market months.

  2. moneystepper says:

    Agreed. Tracking your net worth is essential in building your net worth. If you don’t know the score, how can you win??

  3. Tracking your net worth frequently is like weighing yourself frequently. You are less likely to gain weight or move the wrong direction when you are paying attention.

  4. I am more interested in keeping track of our investable, liquid assets, which does not include assets like our home equity or vehicles which we couldn’t spend very easily or retire on. (We plan to still be in this house when we retire in 10 years.) I use Fidelity’s Full View to track all of our liquid assets. Fidelity uses Yodlee to get non-Fidelity account information and values. Their interface actually got worse in the latest “upgrade.” I guess that is the price of progress.

    • Corey says:

      That’s the first I heard of Fidelity’s tool, even though I have one account with them. I’m planning on moving more accounts to them in the near future. It will be hard to beat personal capital, but why not use both if they have different advantages/tools.

  5. I prefer to track my net worth in a spreadsheet, but I can definitely see why people like to automate it with services like personal capital. I’m glad you found something that worked for you.

  6. Nifty! This is very convenient but I do double check everything. We can never be too sure with anything.

  7. I’ve always done it with Excel but I think I’ll try them out! I haven’t found an online software yet that I really like, so we’ll see how it works out :)

  8. Great post. I’ve been tracking my net worth since I started out working. It motivates me to build it and ensure that it should be increasing annually. I’m tracking it in a spreadsheet and is indeed looking for ways to automate it.

  9. Adam Kamerer says:

    I think the fact that net worth forces an honest look at your financial situation is one of its strengths. It’s easy to trick ourselves into thinking our finances are better than they are (or sometimes worse!).

    The first time I calculated mine and realized it was a negative was very eye-opening moment, and it pushed me to start making real changes to swing it towards the positive.

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