Tracking your net worth is a simple and easy way to help you visualize the wealth that you’ve accumulated.
Net Worth = Your Assets – Your Liabilities
That’s it. In accounting, we would call this your personal balance sheet.
Assets: Increase Net Worth. These can be anything from money in your checking/savings accounts to the value of your car.
Liabilities: Decrease Net Worth. These are things like loans, credit card debt, etc. Pretty much any money/item that you owe to someone else is a liability.
Why Bother Tracking Net Worth?
I did not start tracking our net worth until the beginning of 2016. At the end of every month, I review the amounts in each of our various accounts and input them into an google sheet. I sum up all the assets and all the liabilities. Subtract the liabilities. For the first two months of 2016, we actually had a negative net worth due to our student loan balances. By March, we were able to finally have a positive net worth.
After a few other simple calculations, you can calculate the change in net worth. As well as the percentage our net worth increased or decreased over the past month. If you want to be even cooler, you can take this data and create a visual graphs to help you further analyze your net worth.
Here is a template of my net worth spreadsheet. Pretty simple huh? Feel free to copy and paste it into your own Google Sheet. See my other post about net worth for reasons why you might want to track your net worth.