How do you start tracking your net worth? What does it even mean? If you're like most people, you've probably put a lot of thought into how much you're worth as a person: your values, your confidence level, and what your own personality is like. If you've landed on this site, chances are you're also thinking a bit about your own finances: your debts, what you can do better, and how to budget and save money.
…..But do you know your total net worth? It's the most important financial number of all – even more important than your monthly salary, how much you owe, and how much house you can afford.
Why? because it combines all of the above, and it's also the only way to tell if you're actually going in the right direction with your finances.
Even if you think the number might be disappointing or scary, it's important to know your net worth number. For those who have never attempted it before, below is a tutorial on how to calculate it.
For the purposes of this tutorial post I'm going to be using my favorite net worth tracking tool, which is the Net Worth Spreadsheet that I built and offer in my Grow Your Money Tree Tool Kit. It's the same spreadsheet that I use every month and year to keep up with my financial “number” and the screenshots below are from it.
You can grab your own copy here, or do it with a pen and piece of paper.
I highly recommend the spreadsheet though, because it's easier to keep track of, and because I'm a dork who loves logging in each month and entering the numbers and having it automatically calculate for me. 🙂
The Skinny on Tracking Your Net Worth
Assets – Debts (aka liabilities) = Net Worth
Simple equation, yeah?
But because most people have many different asset sources (like checking, savings, and retirement accounts) and different types of debt (student loan, credit cards, cars) it can be hard to track everything in one place.
Lots of budgeting apps will calculate a loose net worth for you, (Mint, Learnvest etc.) but depending on what you like to track in that software (I don't sync my savings accounts or the account I use specifically just for bill pay.) and if you want to include the value of your home, many apps aren't a “one size fits all” or even that great for giving a clear picture of your net worth.
Which is why I built my own spreadsheet in the first place.
How to Start Tracking Your Net Worth – List Your Debts
Below is a snapshot of my Net Worth spreadsheet from early 2015 when I was busy with my $8k in 90 day challenge. At the top I listed all of my debts (or liabilities.) At the time I only had credit card debt, but you should fill in all of the debts you have.
Add lines in your spreadsheet if you have to. Give each different debt account it's own line, meaning if you have five credit cards list out each one (like I did above), or student loans with two different providers (like one private or one federal) give those each their own line.
One line for every debt.
Here are the most common types of debts and what you should include if you have them:
- Credit Cards
- Auto Loan
- Home Equity Line of Credit
- Student Loans
- Medical Debt
- Personal Loans (for debt consolidation etc.)
- Tax debts to the IRS
If you have a mortgage (which is a type of debt), we'll cover that in just a second.
Start Tracking Your Net Worth: List Yo' Assets
In the next section you can list your assets. Things like:
- Savings Accounts
- Checking Accounts (if you keep a certain minimum amount in them outside of what you spend)
- Private Brokerage Accounts
This is also where you'd list any retirement accounts (IRA's, 401k, etc.) I listed them out in a separate section in my spreadsheet because I like seeing their performance over time.
I also like separating out the assets I have that are available immediately vs. the ones that aren't.
Things that are assets that you will likely exclude from your net worth tracker:
- The value of expensive fine jewelry
- The value of art work
- Shares of company stock (like if you work at a start up for instance). You'd exclude these as most often they are not actual shares, but stock options, meaning you have the option to buy at a certain price after a certain time period and net cash after the sale/swap. Long story short: it's the promise of future money and not money in hand so don't include it.
- Life insurance policy payouts. Excluded for the same reason above; promise of future money and not money on hand right now.
- An inheritance you don't yet have access to.
*A note about auto loans as an asset- yes, cars are an “asset” can sell it for cash, but given how much cars depreciate, and how long it often takes folks to pay them off, I don't list them on my net worth tracker as the value vs. what's owed often equals out.
Really, it's your net worth number so anything goes!
Tracking Your Net Worth & Including the House
You'll see that I included a line for net worth which is just liquid assets vs. debts, and then another line that includes the value of my home.
If you have a considerable amount of equity in your home and want to include it, there's a section for that at the bottom. Each month I record how much I owe on my mortgage and leave the last appraised value of my home at the bottom.
You can get a rough estimate of your home's value on sites like Zillow.
Should I Include My Home?
Before we get into the tutorial, I want to include a quick word about home value. There's some controversy (well, as much controversy as you can get in the personal finance world) over whether or not to include the value of your home in your net worth.
Some argue that since a home's value isn't truly liquid (meaning, you can't access the cash/value the next day if you need it) it shouldn't be counted in your total net worth. There's also the camp that argues that since most only use equity as a line of credit for home repairs, debt consolidation, or as a down payment on their next home, it shouldn't really be counted as an asset since you're only spending instead of saving it.
Plus, you're paying for housing, and since that is an expense, it doesn't make much sense to count it. (Much in the same way I don't count the value of my car.)
Maybe I'm biased because I busted my tush to raise the value of the first home I purchased by doing a massive renovation, but I say assets are assets and any equity you have in the home should be included. Sure, I couldn't touch it tomorrow if I wanted to, but I do have that equity in the event I did want to leverage it to do something, like buying a second home and turning it into a rental property, for instance.
After all, what we're trying to do is get a financial snapshot of how much we're worth and that includes both liquid and equity investments.
Decide for yourself. The tool kit includes a net worth tracking template for those who'd like to include any equity in their home, and those who'd like to go without.
Putting It All Together
- If you're working without the spreadsheet, tally up how much you owe from all your debts.
- Next, add together your assets.
- Then put those two numbers together
- Last, add any equity value of your home (if you so choose).
And voila! You have your net worth number.
Are you surprised?
Depending on how much debt you have, the number could be negative, but don't let that get you down.
A lot of the time, managing our personal finances can feel very overwhelming. We can get down on ourselves for not making all the right money moves all of the time. It all goes back to my mantra of money being a lifelong journey – every month isn't going to be a winner.
But for me, if I look back at the end of each quarter and my net worth is up over the last one, I know I've done something right with my money.
Conclusion (or the TL:DR)
If you want a tutorial on how to track your net worth, go back and read the play-by-play above.
If you want the “done for you” experience, here are a few of my favorite resources.
- The Grow Your Money Tree Tool Kit – which is what I used and referenced above.
- Personal Capital – the “best in class” and industry standard app that tracks your net worth for you.
- Chime – a new (free!) type of bank account that allows you to track everything in one place.
And a final note – don't let your net worth define you. Even if it's a negative number, you are worth so much more than what is in your bank account, friends!