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I don’t talk about net worth enough. But keeping track of your net worth should be a staple in setting up basic finance principles. The great thing about calculating & keeping track of your net worth is that this could be done once or twice a year.
Tracking your net worth should be part of your financial planning skillset along with budgeting. It provides you a bottom-line understanding of where you stand financially. Simple as that.
Net Worth Vs Budgeting
Net worth is used to help understand where you are financially. There aren’t many actionable steps in having a net worth, but it can be used as a baseline to set up goals.
Budgeting is used to help understand your spending habits and to set a framework into controlling your spend. Most actions are created by budgeting which helps you complete your financial goals
How To Calculate Net Worth
Net Worth = Assets – Liabilities.
Assets are anything that you might own or money you have that can be worth any value. Often it’s anything of the following: (real estate, cars, stocks, bonds, savings accounts, cash on hand, retirement accounts, etc).
Liabilities are any debts you have (Loans, credit card payments, etc).
How To Track Your Net Worth
There are a few ways to track your net worth. The most simple way that is done automatically is to connect all of your accounts to Mint and it will calculate your net worth for you.
But if you don’t want to use Mint, I strongly recommend that you track via spreadsheets such as Microsoft Excel or Google Docs.
You can calculate your net worth every so often as you feel. You can also categorize your assets/liabilities to how you see fit.
Take a look at my Net Worth Template below.
If you want to copy this spreadsheet, either click the image or click here. This will take you to a google spreadsheet document. Go to File -> Make A Copy -> Save it either an excel spreadsheet or as a Google sheet. You can edit values as you see fit.
As you can see in this example, because of student loans and high credit card debts, the overall net worth is in the negative.
How To Calculate The Worth Of Your Vehicle & Home
Assuming you own a car or house, I recommend using the following:
- Calculate Car Value -> Go to KBB and fill out your vehicle information. You should get a decent estimate on your car’s value. You can also check out Edmunds as well and see how much similar cars are selling for.
- Calculate House Value -> First, go to Zillow and type in your address under the “sell” tab. You’ll get a Zestimate. Once you get that, go to Redfin and follow the same process. Zillow’s price is slightly inflated while Redfin tends to be more realistic IMO. Get the average between the amounts as your estimated home value.
If you have a negative net worth, don’t worry! Depending on where you stand, you can always make it a short or long-term goal to get to net worth to $0. For me, it was a major step going from -$60000 to $0. It took time, but once you create a goal, you can reverse engineer your path to success.
What are some of the ways you calculate net worth?