How To Track Your Net Worth?
Most people regard the measure of wealth as a thing of celebrities or the wealthy. However, tracking Net Worth can benefit everyone regardless of the financial status. It enables you to gauge your monetary wellbeing so you can adjust. If you don’t know how to track your Net Worth, here is an informative piece to guide you through.
What’s your Net Worth?
It’s the total value of what you own (assets), minus the sum of what you owe (liabilities). An asset is anything you can sell to get cash, including cars, real estate, and jewelry. On the other hand, liability includes personal loans, mortgages, credit or debit cards, car or student loans.
For instance, if your house is worth $300 000 and you owe the bank $200,000, your worth is $100,000. Always remember that your debt counts against your wealth.
Why Should One Track Their Net Worth?
In a world full of quick credit, it’s easy to convince yourself that you own more money than you do. Tracking your Net Worth will thus give you an accurate measure of your overall financial health. Tracking your Net Worth requires you to track your assets and liabilities. This can help you identify areas you spend too much on.
It also acts as an excellent source of motivation. You will begin to set long-term goals that you work to achieve, after a particular period, probably before retiring. You can see how fast or slowly you are progressing towards your goals to address any problems.
Additionally, you will have a better look at your investment performance. If your current investment value continually drops and a different market seems to be doing good, you can reconsider your options.
Your car loan, mortgage, or student loans may not seem like a massive debt on its own, but getting a total value of your liabilities will show you how much they impact your finances. Hence, you will be more willing to pay them off and stay out of debt in the future.
Sometimes it can be hard to note progress until you go back to your previous results. When you record and track your Net Worth, you can create a graph, and you might be surprised at how far you have come. All of the tools described below track your Net Worth over time with nice graphs.
In order to invest in certain investment instruments such as a multifamily syndication, you may need to be an accredited investor. One of the criteria of being an accredited investor is that your Net Worth should be more than $1MM. Thus, tracking your network might become necessity if you are planning to take advantage of such investment opportunities.
How to Track Net Worth?
Calculating your Net Worth is relatively easy. You can key in your list of assets and liabilities in a spreadsheet, sum them up and then subtract the total liabilities from total assets. The biggest problem with this approach is that you will need to keep doing this every now and then as your Net Worth will keep changing. However, there are various tools that make this easier.
The Personal Capital has an excellent Net Worth Calculator to track your Net Worth. The tool is way better than the spreadsheet since it calculates and updates your Net Worth automatically. You only need to link your investments, banks, credit cards, brokerage accounts, mortgage accounts etc. to the tool. Once you log in, it automatically updates your details by connecting to the those financial institutions.
The main benefit of Personal Capital Net Worth Calculator is that it consolidates all your investments and accounts in a single platform so you can easily measure progress. It’s also compatible with mobile phones and desktop devices, so you can easily track your investments. The tool also organizes your budgets for easy cash flow monitoring. It’s free, but you can choose to upgrade to premium to enjoy more features. If you have never used it before, this is how the tool looks like:
Another most popular tool is Mint. It’s owned by Intuit which also owns Turbotax. Mint is meant help you manage your money better. It is one of the first tools to come in the market for managing money. It also connects with all the financial institutions and pull the data in the single platform. It also shows your Net Worth based on the information pulled from the institutions. Mint is also free to use.
Alternatively, you can use YNAB to track your finances. It is a great option if you also need help in budgeting or managing your money. You will learn how to prioritize and plan so you can achieve your financial goals faster. The program offers a free trial for 34 days, but you will need to pay a fee after the time elapses. It has a Net Worth report you can use to track your Net Worth.
Tracking your Net Worth is important for everyone, not just for the rich people. Looking at Net Worth can give you a better idea about your financial situation than just looking at the bank balance. Tracking Net Worth has become easier these days because of the availability of free tools. Personal Capital, Mint and YNAB are some of the popular tools available to track your Net Worth. These tools not only record your Net Worth, but also keep updating it by directly connecting to the financial institutions.