What is Net Worth?
Net worth is the value of all assets, including financial and non-financial assets minus the value of all its outstanding liabilities. Or simply put, the amount by which assets exceed liabilities. Net worth can be calculated for companies, individuals, and governments.
A consistent increase in net worth indicates good financial health. Contrarily, a decrease in net worth may mean overspending by an individual or profit losses by a company.
Think of net worth as your big financial picture. A 10,00-foot view of your assets, including cash, investments, cars, home, and anything else you own that has value minus the debt you carry, like credit card debt, a mortgage, student loans, etc.
How do I Find Out My Net Worth?
There are plenty of free tools to help you calculate your net worth. The best place to start is just to grab a piece of paper or excel spreadsheet and start collecting your information.
Think of all the things that you own and that you owe. Start with the things you own, including any bank information (cash), retirement saving including investment and pension, physical items like cars, boats, homes, etc. All of these things are considered your assets. Be sure to assign a dollar amount to each item you list.
Now make a list of all the things you owe. They could include any debt, like credit cards, student loan, mortgage, a line of credit, the 20 dollars you own your co-worker for lunch, etc.
Hopefully, once you are done collecting all of your information, your total assets equal more than your liabilities. If they don’t, you have a negative net worth and have some work to do.
How to Increase Net Worth
Increasing your net worth is easier said than done. It starts with the right money mindset. To turn your finances around you need to have discipline and it may take some short turn sacrifice.
Dumping any outstanding debt is a great first set. High-interest debt like credit cards or student loans should be the first to go. Freeing up that cash that goes to reoccurring monthly debt payments will give you the ability to save more and build wealth.
Tracking your spending for one to three months is an excellent exercise to see where and how you are spending your money. You may identify leaks with your spending, that you can cut back and free up cash to use in other areas. We often fall in routines or daily habits and spent money habitually without even knowing it.
Ever stop for a daily cup of coffee or a lunch out? Reviewing these convenience type purchases could be the key to building your net worth.
Our Net Worth
Each month I post our latest net worth update. You will find all of the previous months below. I have been tracking our net worth for close to four years now. Using a combination of excel and Personal Capital I tally our assets and liabilities each month. I find having this 10,000-foot view is helpful for planning our short-term (3-5 years) and longer term (10-15 years) goals, coupled with our monthly budget gives us a clearer picture of our money.
It also helps my family understand if we are moving in the right direction with our money overall. Are we adding debt or increasing our savings? The monthly check-ins give us a different way to look at our money over the typical day to day or weekly view.
Another tool I’m using to help keep our net worth moving in the right direction and automate our family’s saving is Rize. Rize is a saving tool that gives you the ability to save for goals you set that add value in your life, like retirement, a vacation, or a future purchase. You can have multiple savings goals at once which all help you start building a saving habit and separate this behavior from spending.
Please take a look at our net worth summary and let me know if you have any questions I can answer for you. I’d be happy to help you with any net worth question you may have.
Currently, our net worth stands at $389,155.