Many people don’t know what their net worth is. However, being aware of it can make a big difference in achieving your financial goals.
Investopedia says that one’s net worth “can be viewed as a financial report card. It allows you to evaluate your current financial health and helps you figure out what you need to do in order to reach your financial goals.”
So knowing your net worth can make a big difference in how you spend your money. And it can even help you set financial goals for yourself or your family. A person’s net worth is like a snapshot of their current financial situation.
Having a “big picture” view of your finances easily accessible at all times is valuable. Also, it helps you more readily know when you need to make changes to your money management system. And making those changes will help you reach your financial goals faster.
What exactly makes up your “net worth”? It’s the actual value of the things you own. It is “net” because you need to deduct the amount you owe others.
So net worth is the value of everything you own after you subtract your loans, mortgages and other debts.
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How to Calculate Your Net Worth
Calculating your net worth is fairly easy. You can figure out your net worth with these three easy steps.
- Make a list of all of your assets. Add in the value of your house if you’re a homeowner. Include the amount of any cars you own. Plus, include all retirement accounts, savings and investment account balances. Also, don’t forget to add in any other larger value items such as boats, recreational vehicles, etc.
- Make a list of all your liabilities. Next, you’ll list all of your liabilities (i.e., debts). Include your home mortgage, any car or other personal loans, revolving and other debt.
- Subtract your liabilities from your assets. Now it’s time to get your result. Subtract your liabilities from your assets. The answer you get is your net worth number.
How did your number come out? Was it a positive number? A negative number? Here’s why it’s important to know your net worth.
Why Do I Need to Know My Net Worth?
You might wonder why it’s so important to know what your net worth is. There are two main reasons.
First, knowing your net worth gives you a clear picture of your current financial situation. Being aware of it is important so that you can make choices that benefit you financially. And it helps you turn things around if it isn’t as high as you’d like it to be.
Second, knowing your net worth helps you to monitor the progress of the financial goals you’ve set. Tracking your net worth helps you to see your big picture financial progress.
Also, it’s a motivator for continuing to take steps to reach the financial goals you’ve set in place.
Track Your Net Worth – Simplified
Gathering up the dollar amounts on every single one of your assets and debts each month might seem like a daunting task. Thankfully, there’s are easier ways to assess and monitor your net.
We’re going to talk about three of the ways you can simplify tracking your net worth.
1. Use Personal Capital to Track Your Net Worth
Personal Capital is a website that gives you numerous money tools to help you manage your money. And the best part: Personal Capital is free. With Personal Capital you can:
- Have access to all of your debt and asset accounts in one place
- Plan for retirement
- Monitor your investments
- Uncover hidden fees
- View, manage and categorize your expenses
- And more
You can use all of Personal Capital’s money tools for free. In addition, Personal Capital will help you manage your investments too.
And they charge a super affordable fee of only 0.49% and 0.89% a year to do so. This fee is a lot cheaper than many other brokerages charge.
Setting up your free account with Personal Capital is easy. Just follow the instructions listed here.
- Go to Personal Capital and click the “Join for free” button in the upper right-hand corner.
- Fill out the prompts to enter your email and other pertinent personal information.
- Enter your bank account and investment account information.
That’s it! Once you’ve entered the account information you want to be viewable and considered for tracking your net worth, you’re done!
Personal Capital takes over from there. They monitor your accounts regularly. This way, you have up-to-date balance information that will ensure you know your net worth at all times.
Don’t worry: Personal Capital uses bank-level military-grade encryption. This ensures they guard your account information with the utmost of protection at all times.
And they have an added security measure as well. No one – not even you – is allowed to move money from one account to another from the Personal Capital website. The site is for viewing and tracking balances only.
Check out our review of Personal Capital if you want more information before you sign up.
Personal Capital also helps you track other areas of your finances.
Note that Personal Capital helps you follow other areas of your money as well, such as:
- Investment gains and losses
- Account balances and transactions
- Categorized spending charts
- Upcoming bills due
- Projected investment fees
- Income reports
2. Use Mint Money to Track Your Net Worth
Another online tool to monitor your net worth is Mint. Like Personal Capital, Mint is free to use. You can use Mint to track all of your bank accounts, investment accounts and more.
Mint can help you categorize your spending and gives you an overview of all financials. Also, it will alert you to when bills are due. This way you’ll have advance notice, so you don’t miss a payment due date.
Mint’s net worth tracker also lets you see fluctuations in your net worth over time. This feature will help ensure your net worth is growing as you desire. Signing up for Mint is easy. Just follow these instructions:
- Go to the Mint.com website and hit the “Sign up free” button in the upper right-hand corner.
- Enter your email address, phone number and create a password.
- Fill in the prompts for adding your bank accounts, asset accounts and liability accounts.
Like Personal Capital, Mint is safe and secure. They use bank-level security and encryption to keep your information protected. Head over to the Mint website to find out more about how Mint works to help you track your net worth.
3. Use YNAB (You Need a Budget) to Track Your Net Worth
You Need a Budget (YNAB) is another popular site for tracking your net worth. However, its primary purpose is to help you budget. It has a system in place that will help you with three financial goals:
- Stop living paycheck to paycheck
- Get out of debt
- Save more money
YNAB uses bank-level security to protect your information as well. The net worth tracker is a bonus since the app is meant to help you manage money better. However, the site’s primary goal is not net worth tracking, but the feature works well.
It’s easy to sign up for YNAB too. Just follow these directions.
- Go to the YNAB website and hit the “Sign up” button located in the upper right-hand corner
- Enter your email address and create a password
- Follow the prompts to enter your financial account information
Note that, unlike the other apps, YNAB is not free. You can try it for free for the first 34 days. However, after that, you’ll pay $84 a year to keep the service. That’s roughly $7 a month. So that’s not a lot of money, but it’s money nonetheless.
Not interested in using an online system to track your net worth? You can always do it the old fashioned way.
4. Track Your Net Worth Using a Spreadsheet
Yes, the old Excel or Google spreadsheet. It may be tedious, but it is an option for tracking your net worth. Although, using a spreadsheet definitely isn’t the most simple way to track your net worth. You’ve got to enter all information manually on a regular basis.
When you use a site like Personal Capital, they enter the numbers for you. This saves you time, and time is money.
But the spreadsheet option does work. Just create a system that works for you and update regularly.
Some people like having their net worth information on their computer hard drive for backup reasons. If the Internet goes down, you’ve still got access to everything.
However, you can always screenshot your information from the online site you use. Then save it to your computer hard drive. But you won’t be able to edit or update it this way.
Using a spreadsheet is a viable way to track your net worth. But you might like the convenience of tracking with a tool like Personal Capital.
Peter Drucker, famous business consultant and author, has a great quote. It says “If you can’t measure it, you can’t improve it.” In other words, those things that get measured can more easily be improved.
Tracking your net worth gives you a catalyst for increasing it. It helps you keep an eye on expenses and debts, and make changes where needed. Besides, it helps motivate you as you see your numbers progress.
As discussed, there are several tools for tracking net worth. For me, online tracking with a free and thorough site like Personal Capital makes it easy.
However, the important part is that you’re tracking it – whatever method you choose.
Do you track your net worth? If so, how? What system works best for you? Have you ever tried a tool like Personal Capital or Mint? We’d love to hear from you.