Track Your Net Worth and Set a Goal
Simply put, your personal net worth is equal to your assets (stuff you have) minus your liabilities (debts). For instance, your assets might be cash in checking and savings, investments, real estate, and cars. Your debts might be your mortgage, credit card balances, and student loans. All you have to do is add up the value or balances of each category and simply subtract your debts from your assets. Ideally, this will equal a positive number.
Why is it important to know your net worth and to track it?
Knowing your net worth will:
- Give you confidence that you are on track to a comfortable retirement
- Give you the knowledge that you are able to pay off your debts
- Provide motivation if you are falling behind
What should your net worth be?
Well, first, it should be positive. We all want to own more than we owe, right? Beyond that, it’s up to you to decide how much you want your net worth to be. You can’t take it with you when you die, so… I recommend using net worth averages for your age range to help you determine what your net worth should be. Here’s a tool from CNN Money that will show you how you stack up against the average. If your around my age, it doesn’t take much in the positive to be ahead of the average.
How do you track it?
Like our regular monthly expenses, my wife and I track our net worth using a simple Excel spreadsheet. We’ve got our current net worth calculated, along with our expected net worth after we purchase our home, and one year later. You don’t have to use Excel. There are plenty of online based calculators out there that will help you get to your net worth. Here are some: Bankrate & Young Money. If you have Quiken or MS Money, they can help you track as well.
If your net worth isn’t a positive number, or isn’t as high as you’d like it to be, SET A GOAL. Put it on paper. Make a short term and a long term goal. Decide how long, based on your ability to save or pay off debt, that it should take you to reach your goals. Consider using Net Worth IQ as a tool to hold you accountable. Best of luck, and stay positive!