Of all the financial planning tools out there, your personal net worth is the easiest to track. It’s a super simple calculation of Assets (what you own) and Liabilities (what you owe).
Assets – Liabilities = Net Worth
Your personal net worth statement can be extremely helpful to:
- Track the growth of your assets. Cha-Ching.
- Watch the balance of your debts go down. Slowly but surely.
- Boost your confidence as your financial position improves. Instant gratification.
- Push you to pay down debt faster.
- Motivate you to stay the course. You can do this!
How To Track Your Own Personal Net Worth
Grab a free copy of the basic Personal Net Worth worksheet that I created for you to begin tracking your net worth now.
As you’re completing the worksheet, remember to keep it basic. If you don’t have a ton of extremely valuable furniture (like antiques), don’t include it. The value of most personal property depreciates too quickly to include it. For valuing real estate, try using Zillow, it’s a free online resource that’s surprisingly accurate. For valuing autos, try using NADA, it may not be totally accurate, so adjust the value up or down. It should be a realistic number that you could actually sell the asset for today.
Don’t be discouraged if your net worth is negative when you’re just starting out. It happens. Mostly because of your home mortgage. That’s okay–it’s the American dream! Real estate is also a really great investment.
Your statement of net worth is a snapshot in time, that’s why you’ll need to update your worksheet on an annual basis. Keep in mind that some assets tend to depreciate over time (like cars), so you’ll need to determine the new value each year. Some people don’t like to include such depreciating assets because it could give you a sense of false hope. I do include it on my worksheet…well, mostly because it gives me the warm fuzzies to have one more thing in the Asset column!
You’ll enjoy watching your position improve, I know I sure do! Progress is progress, no matter how small!
Do you track your net worth? What tools do you use?