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Today’s guest post is from a fellow superhero. Michael is the creator of Super Millennial. He teaches people how to evaluate their financial situation, simplify money management & automate their investments to reach their financial goals. Subscribe for his personal finance “Keys To Success” and blog updates here. Make sure to follow him on Twitter as well.
Note from FinanceSuperhero: This post greatly influenced me to begin tracking my own net worth in earnest. Ironically, when I started tracking my net worth for the first time in earnest rather than simply maintaining awareness of a ballpark figure, I was pleasantly surprised to find out that it was much higher than I had previously thought.
Everyone wants to be a millionaire or billionaire, but to most people it’s just a dream and will stay that way forever…UNLESS you decide to make your dream a GOAL & work hard to achieve it.
If you’ve read “Think & Grow Rich” or Millionaire Next Door it should be evident how important goal setting is in all aspects of life, including finances. Wanting something is one thing, planning & going after it is another…one way to start focusing on becoming a millionaire (so you can ball out like DJ Khaled in any of his 80 music videos) is tracking your net worth. Even though I don’t think he has mentioned/screamed it yet, it’s a major key to financial success (trust me).
Do you know or track your net worth? I’d be pretty surprised/impressed if you are. Whenever I ask someone if they are I tend to hear the same few excuses:
- “Why should I track it? Seems time consuming & doubt it’ll matter ”
- “But I don’t have that much money…”
- “What’s the point of tracking a few thousand dollars?”
- “I’m way too in debt to want to see exactly how much”
It doesn’t matter if you have $1,000 or $1 million dollars, it’s amazing how helpful it is to track your overall net worth…and it takes five minutes a month!
I started tracking my net worth after reading J Money’s “Budgets Are Sexy” …. over the past eight years he’s been able to go from 50K to now 500K and shows exactly how. Needless to say I was very inspired to start…
I REALLY wish I would have started this earlier in life, I’ll be honest and admit I just started in late 2015 (around 9 months now) and within a few pay periods I was amazed at how much it factors into my financial decisions (& how good I was at saving). Don’t worry I’m not asking you to track every single penny you spend, because I know you won’t (nor would I), let Mint automatically do that for you.
I’m only asking that you do this once a month, not daily or weekly to really see your progression and how easy it become to get “richer” by paying attention to your finances.
Here are the top benefits of tracking:
Main Benefits:
- Financial Progress: We all want to evolve & progress in anything in life, its human nature. It’s even better when you grow your $$$ & can look back to the month or year previous and see how far you’ve come. Progress is impossible without change!
- Confidence Builder: For example if you saved an extra $1,000 in your emergency fund or watch your 401K increase due to a bigger contribution. It will make you feel proud of what you’ve been able to accomplish (and want to do more)…..do you think millionaires just got there by luck? No they made a conscious effort to earn, save & repeat!
- Avoids focusing on just assets: If you have 200K in assets but 100K in debt you’re just lying to yourself, it’s important to factor both into the calculation.
- Loans: Your net worth can be a factor if you plan on applying for a loan in the near future (i.e. banks feel more comfortable giving you a loan when you have good credit & money in the bank).
How should you track it? There isn’t one specific way but here’s how I do it and takes up 5-10 minutes each month. I pull up my Personal Capital account for most of my accounts and then add to a google doc (not all of my accounts sync w/PC).
- Here is the Net Worth Tracker I use & recommend (click to download excel file)
It doesn’t matter if you use it or a different version, it’s just important to get in the habit of tracking your progress. Make sure to include all accounts and a comments section so you can notate when there are major +/- changes (i.e. 401K increase, stock market drop 5%, tax refund, inheritance, etc).
You’ll spend 5-10 minutes a month entering the information for assets & liabilities and it will caclulate your net worth.Here’s what you should include:Assets
- 401K – You have a 401K and contribute AT LEAST to your employer match right?
- IRA – Roth IRA’s are amazing, if you need to learn more check this out.
- Checking Account: I personally use Chase, but where’ve you bank make sure you don’t have a monthly “convenience” fee and low ATM fees if you bank at another ATM.
- Savings Account: I love Ally bank – no fees & 1% interest is better than nothing
- Brokerage Account: If you have one…
- Additional Accounts: Any other investment, CD, money market, etc….
Liabilities
- Auto Loans: This is an asset and a liability, if your car is valued at 25K and you have 15K left on the loan add the 25K to assets & 15K to liabilities.
- Student Debt: Yes they suck but you gotta include them too…..
- House: Same as the car example…this is an asset and a liability, if your house is valued at 250K and you have 150K left on the loan add the 250K to assets & 150K to liabilities.
Regardless of where you are financially, knowing your net worth can help you evaluate where you are and plan for your financial future. Once you understand your situation you become more aware of your spending/budgeting and can achieve both your short and long term goals.
On top of planning and reaching goals it will also help you stay motivated and can be a huge confidence booster. It can also make you aware of your current investments and how they are fit for different market conditions. For example in February the stock market dropped but my net worth barely moved, I had such good asset allocation that the loss was minor in comparison to the market.
If you are not watching your personal net worth on a regular basis, you are skipping an important step in preparing for retirement (or EARLY retirement if you do it right). As always save early so you can thank yourself later. Once you have your tracking system setup hold yourself accountable to spend five to ten minutes to update monthly (use a calendar reminder or choose a specific day of the month).
Readers, don’t forget to head over to SuperMillennial to check out more of Michael’s superhero advice and follow him on Twitter.
Do you track your net worth? Have you found a better way? Let us know in the comments section below.
The Green Swan says
July 13, 2016 at 6:21 AMHi Super Millennial, thanks for the post. I’ve been tracking my net worth since my senior year in college, about ten years ago. The most important financial metric for me is net worth and by tracking it closely I am more focused on how I can increase it. And over that time period I’ve certainly learned a lot about what can cause it to go up and down!
Super Millennial says
July 13, 2016 at 11:40 AMGlad you enjoyed it, great job on tracking since senior year of college. Wish I had started then! I couldn’t agree more, once you have a number it sticks with you and has an impact on your purchases & spending habits. Do you track manually or with a software?
Ray Ray says
July 13, 2016 at 7:36 AMI have been tracking my net worth only a few months ago but it has already been a great motivator!
Super Millennial says
July 13, 2016 at 11:43 AMNice, way to get started! It’s incredible how motivating it can be to see your net worth grow by changing by saving more or spending less. Even 1% extra to your 401K can make a big difference over the year.
Keep up the good work! Check out my site for more great content & let me know if you have any questions.
Jon says
July 13, 2016 at 7:41 AMNice post and I agree that net worth is one of the most important things to track if you want to get anywhere financially.
I take a different view on cars though. Since they are a depreciating asset, I never include the value of the car in my assets or net worth calculations. Even though it is technically considered an asset, in my view it really is 100% expense over time.
A house will likely go up in value over time, but a car never will.
Super Millennial says
July 13, 2016 at 11:44 AMThanks for reading Jon! I understand on the cars, that’s a tricky one to track and think your way is a good way to track as well. Do you track with an app like Personal Capital or a general doc like this?
Jon says
July 13, 2016 at 4:49 PMI use Personal Capital to track my net worth on a continuous basis but still sit down twice a year to crunch the numbers in Excel. I still like to take a look at it “from scratch” and compare my portfolio to some other allocation models that I have to make sure I feel good about everything. Old habits die hard!
Mike @ Super Millennial says
July 13, 2016 at 7:57 PMHah I’m the same way! Personal Capital is easy to use when you feel like checking in but still love the excel doc as well. Congrats on tracking everything and hope you’re reaching your goals!
Brian @ debt discipline says
July 13, 2016 at 10:20 AMI ‘ve been tracking my net worth for several years now. It’s great to have a big picture view of your money. I have used a lot of different tools, but usually end up back to excel and crunch the numbers myself.
Super Millennial says
July 13, 2016 at 11:49 AMNice job Brian! I agree I had used Personal Capital but still liked crunching the numbers myself. The number feels more real than just seeing it update online.
Thanks for reading, check out my site for other great content.
Brian Lund says
July 13, 2016 at 2:21 PMGreat post Michael. This is a pretty important metric to know when your goal is financial independence or to retire early. My spreadsheet is getting pretty bulky, but I always try to “look at the forest” rather than just a single “tree”. Tracking stuff helps me do that.
Super Millennial says
July 13, 2016 at 5:00 PMCouldn’t agree more Brian! My sheet is getting up there and also added a financial goals tab to remember the ultimate goal. For some reason I still like tracking on Excel, just a habit now…how long have you been tracking your net worth?
Thias @It Pays Dividends says
July 13, 2016 at 6:47 PMNice summary of why net worth is important! I officially track mine on a quarterly basis just so I don’t let market movements affect my judgement as much as if I would on a monthly basis. That being said, I do agree that it is a powerful tool to use to get your financial life in order!
Mike @ Super Millennial says
July 13, 2016 at 7:43 PMThias I completely agree, I don’t let the market influence but I can see how it could sometimes! I’d probably forget if I did it quarterly lol. I’m glad its working so well for you, great to hear! Check out my site for more great content.
ZJ Thorne says
July 13, 2016 at 10:36 PMIt is absolutely a confidence booster and a way to level-up!
Mike @ Super Millennial says
July 14, 2016 at 11:04 PMCouldn’t agree more, wish more people did it!
DividendsDownUnder says
July 14, 2016 at 2:50 AMHey there,
Net worth is a very powerful tool as a motivator and to follow your progress. We are starting to track our net worth more, we may blog about it at some point, we’re undecided on this.
Tristan
Hero says
July 14, 2016 at 9:58 PMThanks for pointing out the psychological power of tracking your net worth, Tristan. Like you, I am making more deliberate efforts to track my net worth, but as one who practices stealth wealth, I’m reluctant to share the details. I do, however, applaud bloggers (and people in general) who are willing to do so!
Mike @ Super Millennial says
July 14, 2016 at 11:06 PMI agree with you both, I like the idea of tracking for my own sake but not ready to share. Definitely applaud others for sharing their info….A lot of them are the reason bloggers (including myself) get started in the first place.
Millennial Moola says
July 15, 2016 at 10:02 AMI try not to track it, simply because I like to think it will be much higher in the future than it is today, and hence I want to spend my time focusing on building wealth rather than watch it. That said, I respect the views of people who want to measure it instead
Dollar Engineer says
July 18, 2016 at 8:27 AMI am very similar to you super millennial. I started tracking my net worth a few months ago after seeing J$’s blog and love using personal capital to do it for me. I also throw my numbers in my own spreadsheet so I have it myself and can make comments to remind myself of key events. It’s so cool seeing that number grow month to month.
Mike @ Super Millennial says
August 11, 2016 at 5:51 PMLove it! That’s awesome to hear. I love Personal Capital still can’t believe its free. Definitely still do it old school with the excel doc, feels good to see for sure! Thanks for reading