Most people think about how much money they have in their bank account. Net worth is not discussed much outside of the financial world. Financial literacy involves an understanding of your net worth and can help you make informed decisions about your money.
All consumers should think about net worth as they build wealth and move through life. Understanding net worth can help you make important decisions about your money, as it can be used to quickly measure financial success and stability.
We are going to look at how you can track your net worth. Tracking your net worth can help you understand your financial situation and make better financial decisions.
What is Net Worth?
Net worth is the difference between what you own and what you owe.
A very personal calculation is what this is. It is important to think about all of your options before making a decision. It is nothing to worry about when approaching a lender about taking out a mortgage or auto loan. A good credit score can help you get a loan with more favorable terms.
As you age and your financial situation becomes more complex, it is a good way of tracking your true financial value. It can be used to create a financial plan for the future and ensure that your goals are met in a responsible and effective manner.
Todd is 40 years old with a house valued at $200,000, a $150,000 mortgage, $20,000 in checking, $10,000 in consumer debt, $10,000 in personal property, and $50,000 in mutual funds and ETFs. He is planning for a comfortable retirement and working hard to ensure his financial future.
Todd has a net worth of $120,000. He worked hard to achieve this financial success. Way to go, Todd! You should be proud of yourself.
Calculate Your Net Worth With This Template
There are many ways to calculate net worth on the internet. Not all net worth trackers are the same. Some net worth trackers allow users to view their finances in a variety of ways.
If you’re interested in figuring out your net worth, head over to Millennial Money’s free net worth worksheet, plug in your figures, and see where you stand.
Also, be sure to check out our free net worth calculator.
You may be surprised by what you learn. Don’t be afraid to take a chance, you never know what will happen! You might see that you have some work to do. It’s important to take the time to review your progress, as you may see that you have some work to do.
Grab the Free Net Worth Template
Assets vs. Liabilities
The net worth spreadsheet divides it into two categories: assets and liabilities. The building blocks of your net worth are the two categories. The difference between these categories is important to note. Understanding how each category relates to the overall goal is important in order to make informed decisions.
Assets
Assets include your bank account deposits, investment accounts, retirement savings, valuable items, and so on. Building assets is a key component to achieving long-term financial stability. It might take a while to round up every number if your asset allocation is on point. You should double-check the figures before you submit them, as mistakes could be costly.
- Checking Accounts: Chances are you’re using checking accounts for everyday purchases. If you don’t have a lot of checking, you should still add each account balance to your net worth. Tracking your net worth over time will give you an idea of your financial progress.
- Savings Accounts: Make sure to include all your savings accounts from traditional banks, online banks, and credit unions, too.
- Money market accounts have higher interest rates than regular checking accounts. Money Market Accounts can be used to save and earn money at the same time. You can add these to your list of assets. Review and update your assets on a regular basis.
- Retirement Investment Accounts: Retirement accounts may include traditional individual retirement accounts (IRAs), There are many types of IRAs, including solo 401(k)s. These are examples of tax-friendly accounts that let you maximize long-term growth.
- Brokerage Account(s): You should also include any personal investment you’re doing through brokerage firms like Schwab, Fidelity, and Vanguard.
- Cryptocurrency account(s): If some of your money is tied up in cryptocurrency, it still belongs on your list of assets. Pick out your total portfolio balance and add it to your list of assets. The assets should be categorized according to their risk level.
- Real Estate: Contact your lenders and ask for a valuation report on your personal home and any investment properties you own. You should get an updated market value from the valuation report. When reviewing the report, it is important to consider any changes in the market. If you own your home but don’t have a loan, you can get an assessment from an independent appraiser. This assessment will help you understand the current market value of your home, so that you can make an informed decision about what to do with it.
- Vehicles, including cars, motorcycles, boats, or heavy machinery, count as assets. Add each one to the list. It is important to keep the list updated once you have listed each item. Do you need help figuring out how much each is worth? Head to Kelly Blue Book.
- Take an inventory of any expensive personal accessories you have. You should include a record of any appraisals you have for your jewelry. This could include your engagement ring, heirlooms, and watches. These items are passed down through generations, making them even more valuable. The jewelry has a lot of value. If you want to know its exact value, you should get an appraisal from a gemologist. Unless it has potential future value, don’t bother with anything less than $1,000.
- Other Valuables include any other items of serious value. There are items that include jewelry, heirlooms, artwork, and collectibles. This category could include farm animals, a piece of artwork, or a valuable baseball card. A rare comic book, an antique watch, or a limited edition figurine are some items that could fit into this category.
Liabilities
Here are some examples of liabilities that should be included in your net worth calculation. Mortgages, car loans, credit card debt, student loans, and other forms of debt are some of the liabilities.
- Mortgage: When you request a valuation report on your home, calculate how much you still owe on your mortgage and add that to your liabilities.
- Are you still paying off your student loans? Refinancing your loan could lower your interest rate and monthly payment. Each one is a liability. In order to make informed decisions, it is important to understand the implications of each liability. Count them as such. This way, you can be sure that everything is accounted for.
- Credit card debt is one of the most notorious and expensive types of liability. Add your credit card balances to the calculation.
- Car loans also count as liabilities. Ensuring that the repayment plan fits your budget and financial goals is important for those looking to take out a car loan. Determine how much you have left on your cars. The car manual can provide more detailed information.
- Make sure to factor in any other type of consumer financing that you have. Student loans, personal loans, and other types of credit card debt may be included. Personal loans, TVs, and sofas may be included. Don’t leave any other debt out. No matter how small or insignificant your debts are, be sure to include them in your repayment plan.
If you subtract your assets from your liabilities, you have a net worth. To gain insight into your financial health, it’s important to calculate your net worth periodically. I hope it is a positive number. I think the result will be better than expected.
Tips for Increasing Your Net Worth
Calculating your net worth can leave you wanting more. Here are some things you can do to increase your net worth. To identify areas where you can reduce spending and save more, begin by creating a budget and tracking your expenses.
1. Pay Off Your Debt
One of the biggest destroyers of wealth is high-interest debt. To improve your net worth, start by paying off your high-interest debt or consolidating your payments by taking out a low-interest loan. The higher your net worth is, the less you will lose on a monthly basis. Paying off debt will give you financial freedom.
2. Buy Property
Buying property is one of the best ways to increase your net worth–especially if you buy a rental property in a great location. If you do that, you get a house to your name and an asset that can potentially produce a steady monthly cash flow. This is a great strategy for building wealth.
3. Invest More
If you want to pump more money into your retirement accounts at regular intervals, consider putting yourself on an auto investment plan. It can help to increase your savings and keep you on track with your finances. By funneling money out of your checking and savings accounts, you can potentially generate larger returns in the stock market. Over several years, this money can produce compound interest, increasing your net worth.
4. Start a Side Hustle
The fastest and most effective way to increase your net worth is to start a side hustle. If you’re in a position to do so, consider taking on a second job in addition to your full-time income. It can be difficult to start a side hustle. You can reach your goals with dedication and focus. The extra cash you generate adds up quickly. Work as hard as you can to save money. The earlier you start saving, the more secure your financial future will be. Your personal net worth will increase if you bring in more money. It is important to remember that your net worth is more than just what you make.
5. Consider Ditching Your Car
It may seem odd if your car is paid off. By the day, a car is a depreciable asset. Unless you own a classic car that is in top condition, it’s probably worth less than you paid for it. It’s important to keep an eye on the market value of your car.
You are paying for gas, maintenance, insurance, and even parking. It’s important to budget for these costs because they can add up quickly. There are also accidents to consider. Car ownership comes with a lot of expenses. Most people spend hundreds of dollars a month on their car because it is burning a hole in their wallet. It’s difficult to keep up with the cost of running a car when gas prices go up.
Why don’t you stop the chain of reckless spending? We must break free from this cycle of reckless spending and find a way to make better financial decisions that will benefit us in the long run. You can pocket the cash by selling your car. Cash can be used to purchase a more fuel efficient vehicle that will save you money in the long run. Liquid cash, which you can invest and grow, will come back to you when you lose a depreciable asset. It is important to keep track of depreciable assets and take advantage of the deductions available to you.
Frequently Asked Questions
What is good net worth?
You can only make that assessment. It is important to consider all of the factors when making a decision. Net worth is a calculation of what you own and what you owe. Good or bad net worth is not a thing. Net worth shouldn’t be used to measure success or failure of an individual. A negative net worth is something you want to avoid. If you want to have financial independence, you should have a net worth in the hundreds of thousands or millions of dollars.
What is the average net worth?
The average net worth of an American family between 2016 and 2019 was reported at $748,000 as of September 2020. The median net worth is $121,700. The top 10% have a median net worth of $1 million.
How much net worth do you need to retire?
The general rule is to have at least 10 or 11 times your annual salary saved up by the time you retire. You want to have a net worth of around $880,000 when you retire, if you earn $80,000 a year. You will need to save $800,000 in order to reach that goal. Depending on your income level at the time of retirement and future expenses, this figure may change. It’s important to plan for retirement now in order to make sure you’re financially secure when the time comes. To hit your target number, keep debt to a minimum and focus on acquiring valuable assets. The key to creating long-term wealth is to focus on building up your assets rather than relying solely on income. Don’t buy expensive cars that depreciate in value.
Is budgeting good for net worth?
One of the best things you can do to boost your finances is to stick to a budget. Tracking your expenses can make it easier to stick to a budget. You can keep a budget in Microsoft Excel or by using online budgeting software.
Net worth tracking is not the same as budgeting. It’s a good idea to understand where you stand financially in order to plan for your future. Managing daily finances is what budgeting is about. It can help you reach your long-term financial goals. Net worth is a measure of wealth. Net worth is a great indicator of financial stability and can provide important insight into one’s long-term financial goals.
The Bottom Line
If you want to reach true financial independence and retire on your own terms, then you need to track your net worth. It’s that simple. This is important for financial planning. By taking control of your finances, you can make sure that your financial future is stable.
It doesn’t matter if you use an excel spreadsheet or a third-party app. It’s important to get the best results with either tool.
Do what you are comfortable with. Don’t be afraid to ask for help if you need it. You have a running score of where you stand if you track your total assets and liabilities. To make the most of your resources, it is important to regularly assess your financial situation.
You can make changes to improve your situation if your net worth isn’t where you want it to be. Pick areas where you can cut back or allocate more resources by making a budget and tracking your spending. Pick up a side hustle, ask for a raise, invest more, or buy property. All of these things can increase your net worth. Maintaining a budget is an excellent way to increase your net worth.
You will be on your way to financial freedom if you set net worth goals, figure out a course of action to get there, and stick to it. Good luck!
