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It’s that time again! Around the 15th of each month I sit down to update our net worth. These monthly reports began in the summer of 2017 after I read The Millionaire Next Door by Thomas J. Stanley, Ph.D. and William D. Danko, Ph.D. I learned that if I am serious about building wealth and becoming a millionaire, I need to start consciously working to improve our net worth now, and the obvious first step is to track it. You can view that very first net worth report here!
However, if you’re not familiar with the term net worth or how to track it, I’ll take a few moments to cover that information. If you know the drill and just want to see this month’s numbers, feel free to keep scrolling!
According to Investopedia, “Net worth is the amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure of how much an entity is worth. A consistent increase in net worth indicates good financial health; conversely, net worth may be depleted by annual operating losses or a substantial decrease in asset values relative to liabilities.”
But to keep it simple, your net worth is just the value of your assets minus your liabilities.
Assets may include your home, vehicles, investments and money in your bank accounts. It can even include art, jewelry, furniture, etc., though I don’t include any of those things when calculating our net worth simply because beyond checking the value of our cars each month, I just don’t want to take the time to figure up the value of every little thing we own.
As for liabilities, this is the amount of debt you owe on these things. My husband and I have not had any liabilities since paying off our house in January 2018, but when we did have a mortgage, the amount we owed from month to month was subtracted from the current value of our assets when calculating our net worth.
Some calculate their net worth manually using a spreadsheet, but I have never calculated our net worth any other way than using Personal Capital. I mentioned this service a few minutes ago, but I’ll tell you more about it below.
This is the only financial tool I use that I haven’t come up with myself. The service is so quick and easy to use that I’ve just never felt compelled to put a spreadsheet together to calculate it. Plus it’s free!
Personal Capital is an app/service that updates your net worth upon sign-in by connecting to your bank accounts, investment accounts and even Zillow, though I found that our “Zestimate,” their estimated value of our home, fluctuated wildly almost month-to-month. Connecting your accounts is optional, so this is not something you have to do if you don’t feel comfortable with it.
It is good to keep in mind that some companies do not allow third parties to have this sort of access to their information, and because of this, I have to log into my husband’s retirement account and manually update the value on Personal Capital. Also, to get a good idea of the value of your vehicles, I recommend checking kbb.com and manually updating those amounts when you log into Personal Capital.
They are now offering an awesome referral program for their free service, so it’s a great time to try it out. If you use this link and connect a qualifying investment account (taxable brokerage, 401k, IRA, 529, etc.) with a balance of over $1000 within 30 days of signing up, you and I both will receive a $20 Amazon gift card!
Let’s move on to the numbers!
Below I’ll break down how much we currently have in cash and investments, as well as the estimated total values of our home, car, truck and motorcycle.
- Emergency Fund: $5,000
- Savings Toward Investment Property Rehab: $17,534
- Sinking Funds/Short Term Savings: $3,649
- Checking: $1,199
- Roth IRAs: $4,542
- 401Ks: $84,973
- Real Estate: $30,000
- Home: $150,000
- Vehicles: $10,325
Net Worth: $307,222 (+$4,054 from last month)
Our net worth has increased by $41,181 so far this year and has increased by $112,741 since I began tracking it in July 2017. I really wish I would have thought to begin tracking it sooner to see more of our progress!
Most people don’t track their net worth every month like I do and choose to do it quarterly or every six months. Using Personal Capital turns this into a pretty passive process, but some people find logging into their accounts and manually tracking their net worth to be a somewhat therapeutic experience.
No matter how you choose to do it or how often, I highly suggest consistently tracking your net worth if you’re not doing so already. It’s so motivating to watch your numbers increase as you pay down debt, save money and invest, and it is reassuring to see that you’re heading in the right direction as a result of all your hard work.
If you have any questions about calculating your net worth, just let me know in the comments below. Thanks for reading and be sure to check back soon!