How to Track Your Net Worth (and Why It Matters)
Tracking your net worth is one of the most important steps in managing your personal finances. It provides a clear snapshot of your financial health and helps you make informed decisions about saving, investing, and spending. Whether you’re just starting or looking for better tools, this guide will show you how to calculate and track your net worth effectively.
What is Net Worth?
Your net worth is the total value of your assets minus your liabilities. In simple terms:
Net Worth = Assets – Liabilities
- Assets: Cash, savings, investments, retirement accounts, real estate, vehicles, and valuable possessions.
- Liabilities: Debts, including credit card balances, student loans, mortgages, car loans, and personal loans.
A positive net worth means you own more than you owe, while a negative net worth indicates you have more debts than assets.
Why Tracking Your Net Worth is Important
- Measures Financial Progress: Helps you see if you’re moving toward financial independence.
- Identifies Problem Areas: Highlights high debt levels or unnecessary expenses.
- Motivates Better Money Decisions: Encourages saving and investing over spending. Imagine seeing a graph that gradually trends up rather than down. Pretty motivating, right?
- Aids in Goal Setting: Helps with financial planning, retirement, and wealth building. It’s one metric that every person should know, but it’s debatable whether it’s the most important metric.
How to Calculate Your Net Worth
- List Your Assets: Add up all your cash, savings, investment accounts, real estate, and valuable assets.
- List Your Liabilities: Total your debts, including loans, credit card balances, and any other financial obligations.
- Subtract Liabilities from Assets: The result is your net worth (either negative or positive).
Here’s an example:
- Assets: $100,000 (Savings: $20,000, Investments: $50,000, Home Equity: $30,000)
- Liabilities: $40,000 (Student Loans: $20,000, Car Loan: $10,000, Credit Card Debt: $10,000)
- Net Worth = $100,000 – $40,000 = $60,000
Best Tools to Track Your Net Worth
Manually tracking net worth in a spreadsheet works well as it builds good financial habits, but using a financial app makes it effortless. Here are two of the best apps:
1. Empower (Formerly Personal Capital)
Empower is a powerful tool for tracking your net worth and managing investments. Best of all, it’s free! You can read a full review here.
✅ Features:
- Automatically syncs all your financial accounts in one place.
- Provides a real-time net worth dashboard.
- Tracks investments, retirement accounts, and cash flow.
- Free to use, with optional financial advising services.
2. Monarch Money
Monarch Money is an excellent budgeting and net worth tracking tool with strong customization options.
✅ Features:
- Syncs all your accounts to provide a full financial picture.
- Helps with budgeting and financial planning.
- Offers collaboration features for couples and families.
- Paid subscription with a free trial available.
How Often Should You Check Your Net Worth?
- Monthly: Great for those actively paying down debt or investing. This also helps strengthen good financial habits so you stay on track.
- Quarterly: Ideal for long-term financial tracking. See how much progress you’re making every quarter so you can pivot or shift things around as needed.
- Annually: Perfect for a big-picture review of your finances.
Final Thoughts
Tracking your net worth is a game-changer for financial success. It keeps you accountable, helps you make smarter money decisions, and ensures you’re on track to achieve financial freedom. With tools like Empower and Monarch, staying on top of your finances has never been easier.
Do you track your net worth? What tools do you use? Share your experience in the comments below!
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