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How to Measure and Track Your Net Worth

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Net Worth Spreadsheet ExampleWhen you were in school, chances are you knew what you needed on each test to get an A, a B, or a C (or avoid an F!). At work, you have project deadlines to meet and performance criteria to fulfill. When it comes to your finances, there isn’t a convenient, single number you can use to track your progress. In school, there was your GPA. In personal finance, you can’t just look at your account balances because it doesn’t give you the whole picture. That’s where measuring and tracking your net worth can come in handy.

Every month I record a snapshot of our family’s net worth in a simple excel spreadsheet. By definition, net worth is your total assets minus your total liabilities. Examples of assets are cash, investments, and real estate. Examples of liabilities are debts like credit card, car loan, student loan, and mortgages. Nothing fancy there, just some simple math.

The value in doing this each month is that it gives us a “state of the family finances” you really can’t get in looking at any other number. You might have savings goals, like X dollars for a home downpayment, or budgeting goals, don’t spend more than $250 on restaurants this month, but nothing that gives you guidance across all of your goals quite like your net worth.

Consistency Trumps Methodology

I recommend ignoring what you read about what to count and what to ignore for your net worth equation. Come up with an equation that works for you and your family. We don’t include cars in our net worth, maybe you want to include your car(s). We keep our home value static (it’s the appraisal value) each month whereas you might want to adjust it based on comparable sales or some other metric. In the end, you want to keep your figures consistent from month to month because it’s the difference that matters, not the final number (so much).

In addition to giving you a progress report each time you update it (we do it once a month), it also gives you the opportunity to have a financial check-in with your family. When you discuss the finances, take whatever notes you have and enter them into the place you track your finances.

Big increase because of a bonus? Put a note.
Big drop because you had to pay taxes? Put a note.
No change but you sold some stock for gains? Put a note.

In a few months to a year (or more), when you go back to review your progress, these notes will be important to add some commentary to otherwise boring numbers.

How We Track Net Worth

It’s pretty simple, we add up all of our assets and subtract our liabilities. Thanks and have a great day! :)

Just kidding, not quite done yet. While those are the basics, we do a few different things and play a few statistics games when it comes to coding each of our accounts. Here are some the things we do:

  • For our assets, we categories them as liquid (cash, CDs, savings, checking), investment (taxable brokerage), Federal (bonds), and retirement (IRAs, 401(k)s). We feel that separating them by how easy and painless (tax and feewise) it is to access the funds is valuable.
  • We don’t track our credit card debt because we pay it off each month. We only have two other liabilities, student loan debt and a mortgage, and they get their own categories.
  • We do not include our car’s value because it doesn’t add anything to our understanding of net worth. We paid off both before we started tracking our net worth. If we had loans, we’d keep the Kelly Blue Book private sale value on after the loans are paid off just to keep continuity.
  • We include our home’s appraisal value to help offset the mortgage. Much like a car loan needing a car to give it some perspective, we keep the appraisal value.

In terms of statistics, we sum up all the categories (liabilities, liquid, investment, Federal, and retirement) into individual columns and then sum them into a total value (subtracting liabilities). This gives us a month to month snapshot of our total net worth as well as the changes in our various categories each month. We include notes in each cell whenever there’s something notable. For example, we recently rolled over my wife’s old 401(k) to Vanguard and noted this in the various columns. In a year or so, when we go back to look at 2009, we’ll know why our Vanguard account suddenly surged mid-year for no reason.

What are some tips and tricks you’ve used in tracking your net worth? Techniques you’ve used to achieve your goals sooner or just give you the opportunity to track them better? I’d love to hear about the things you’ve done so we can improve our process!

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58 Responses to “How to Measure and Track Your Net Worth”

  1. FinEngr says:

    Finally someone else who doesn’t believe in tracking cars as assets. It’d be the same as buying an investment you KNOW will depreciate 40% or more after 5 yrs. What’s to track? How much of your capital has vanished?

    I bounced to networthiq one day browsing, and realized a fair amount of people’s some ENTIRE worth was comprised of cars/homes.

    Another strategy I employ with investments is tracking deposits against cost basis so I can calculate a investing-savings rate. This way, no matter where the markets are and what your returns are, you can say “I’ve invested XX% of my income this year”.

    • NateUVM says:

      I understand Jim’s reasoning behind not including cars as part of his net worth, but to simply not include them because they depreciate? Would you also weed out those of your stocks that had lost value since their purchase, too?

      No, there is value in a car. It may decline over time, which is why, to maintain or improve your net worth, you would want to make up for it somewhere else (investments, cash flow, etc…), but there is always value in it at any given time. If you are counting a car loan against your net worth, you should certainly include the value of the car (depreciation and selling costs already factored in) as an asset.

      • FinEngr says:

        Right, I agree with the second part of your comment. Maybe I wrote the post too quickly, but let me expand a little.

        First, the argument about excluding stocks does not work because the potential to regain value always exists (unless declares bankruptcy, etc).

        Unless you find a sucker buyer or your car becomes a classic, I can’t think of a single situation were there’s potential for the car’s value to increase (I am not trying to be rude, I truly tried to think of a situation were it would reverse).

        As for me, I purchased my car 10 yrs ago for $10k. It currently (kbb) retails @ $750. My insurance premium, gas, and maintenance wipe this out and it actually becomes a liability. Because I am already discounting these costs from my savings I technically have accounted for the vehicle in my net worth.

        If you have loan obligations or or plan on selling a vehicle which has notable value, than by all means you should track it.

        The point I was trying to highlight is how much weight SOME people place on vehicles. Seeing users with $80,000 “net worth”, but only $1,000 saved & $1,000 invested (not exact, but close to something I saw on networthiq), it only makes me wish that they would redirect/focus their funds elsewhere.

        At any rate, feel free to comment back. We’ll see where this goes.

        • NateUVM says:

          I think that, given your particular situation (car that is paid off and has very low re-sale value), where it is essentially a net wash, it makes perfect sense to ultimately leave it off the balance sheet.

          And you make a great point about those that think of their cars as being the foundation of their net worths… Kinda shaky.

          But I was responding to your general assertion that people, as a rule, shouldn’t include cars as assets…”Finally someone else who doesn’t believe in tracking cars as assets. It’d be the same as buying an investment you KNOW will depreciate 40% or more after 5 yrs. What’s to track? How much of your capital has vanished?” I just think that there are a lot of people who drive cars with SOME value and a lot more that have loans on their cars. To generalize and say that they shouldn’t be tracking either I think is leaving an important piece of the net worth picture missing.

          Back to your scenario, I think it might actually even be appropriate for you to ADD a section to your net worth calculations, however you track them, for “Car,” and just list it as $0. Leaves open the possibility that, in the future, you COULD have a car that has retained some value. Similarly, you could add a line item for a car loan to count against your net worth when it becomes part of your financial picture. Unless, that is….you plan on never owning another car.

          (Don’t worry about the rebuttle re: reselling a car for more…. Though, how do you know my Civic isn’t a classic?!)

        • NateUVM says:

          As for my suggestion “you should add line items…” Merely a suggestion. Clearly, and by all means, you should do what works for you. Didn’t mean to be all preachy there.

    • Fred says:

      We track and depreciate our car’s values according to the Kelly blue back value because:

      (1) it smooths the impact of buying a car on the net worth calculation over the course of the life of the car (usually about 8 years for us). We pay cash, but it is unfair to put a $10-20K net worth hit in a single year.

      (2) it helps us have a sense of how much the car is costing per year (e.g., how much value are we losing as we hold the car?)

      (3) it prepares us better for how much we’ll get for a sale when we decide to purchase a new car.

      While the effect on net worth is somewhat negligible (we buy used, private party usually), there is still value in tracking it.

  2. Chris Strunk says:

    I have a spreadsheet tracking net worth since I graduated college and started full-time work. That was in June 2009. I like Excel and I’m comfortable with it. I bought Quicken 2010 to try to get more advanced for the new year but it’s such a pain to set up and get exactly right. I haven’t found a good way to get monthly cash flow statements. I’ve found the key to consistency is using a system you’re comfortable with.

  3. Infinion says:

    Yodlee does this for you. You can also tell it to not include certain accounts in your net worth (CC you pay off each month, etc). I assume Mint does this too, and probably some other software too.

  4. Frugal says:

    Many of us use Quicken / Mocirsoft Money. I use Quicken and does a nice job once setup is done properly. You can run various reports based on your needs/ desires.

  5. Soccer9040 says:

    Do you track using financial software like Quicken or Mint? or are you using something homemade like an Excel workbook?

    • Jim says:

      For a long time I was using Excel and only recently have I started using Quicken, though I still update my excel as a backup.

  6. cubiclegeoff says:

    I use networthiq.com, mostly because I started to a couple of years ago and it was easy. I don’t think it allows you to see how well you’re doing year to year (such as the percent change from year to year), but the graph is nice to look at.

    I just add in my savings accounts, investments, and retirement (excluding my wife’s pension since that would be hard to figure out exactly how much it’s worth), one musical instrument that is worth a significant amount, and the appraised value for our house that we’ll keep constant until I either decide it may be worth more, or it gets appraised again. For debts, I include the mortgage, student loans, and car loan. We never carry a balance on our credit cards so we don’t include that, and since our checking account usually is associated with our monthly purchases and will be used to pay off the credit cards, we don’t include that.

    I don’t include our cars because I’m lazy and even though I include the car loan, it’s hard to say what the car would be worth and since I’ve generally always done it that way, I’ll stick with it.

    I should start adding notes, which I do sometimes, but probably not enough.

    So our net worth is conservative, but I don’t mind it that way, it’s more to make sure that we’re continuing on the right path.

  7. Ryan says:

    I use Mint. It can’t get any easier.

    • jsbrendog says:

      yup. me too. it also seems that they’ve fixed the problem with ingdirect, at least when i have logged in recently. the only spotty one is with my loans, aessuccess, but it still updates just not everytime i log in. small price to pay to be able to see everything right there, including net worth

      • CK says:

        I use mint as well. Although it still doesn’t cover my credit union and my profit sharing retirement. But it gives a good snapshot.

  8. saladdin says:

    Tracking networth is just something I don’t get. My girlfriend’s mom has a 200k house that is paid off but has zero dollars for retirement. So by formula she has 200k networth. But she is as cash poor as a graduating art student.

    People calculate their networth differently so there is no way to compare. Completely worthless calculation. It has no use. It’s just something we use to make us feel better. If your networth sheet is filled with cars and houses I just don’t see how that is useful.

    saladdin

    • Soccer9040 says:

      “Your” net worth might mean something completely different then someone else’s. Its all a matter of how you set it up. In her case, I would exclude the house from her liquid net worth, but still include it in the total net worth. Different reports tell different stories.

      How do you ever know if your net worth is rising or falling if you never have a handle on what it is. Like Jim said – pick a method and stick to it. Its the consistency that matters.

      • saladdin says:

        But none of the reports/formulas are accurate. Who cares if you are consistent if it is worthless information. So what, you can get consistent worthless data? Or consistent growth of meaningless numbers. As I said, it is a feel good number and that’s all it’s good for.

        People include houses but I never see anyone subtract commission, closing fees and the less then full price that you would get if you sell.

        If you want to compare retirement savings fine, we can figure something out. Call it that. But if someone is including houses, cars, baseball cards, your extra kidney and what you would get for selling your girlfriend on the black market then no way is that remotely accurate to real networth.

        saladdin

        • Jim says:

          If you consider them meaningless then you shouldn’t bother with it but I find value in doing it. It’s not just a feel good number for me (though feel good is certainly a small part of the equation) because it does include retirement assets, which you find value (and so do I).

          How useful are any progress reports? They take time and don’t actually help you accomplish your goal. They still happen because it’s important to get a good picture of your current state. Net worth is the same way.

          What would you use as a better metric of getting a sense of your personal finances?

        • Chris says:

          I think that it is what you choose to make of it. While worthless to you it may mean the world of a difference to someone who is hurting financially and is using it as a means to start learning and caring about their own personal finance.

    • Infinion says:

      I agree with soccer, don’t include cars and houses. Certainly not cars, that’s crazy. Don’t include houses unless you somehow consider them very liquid.

      • cubiclegeoff says:

        I include my house since it’s a major asset and I couldn’t include my mortgage without the house since the house is worth something. Just because it’s liquid doesn’t mean it shouldn’t be included (most retirement accounts are not liquid and most people like to include those).

      • Chuck says:

        I consider my cars liquid. Last year I sold one, and I don’t see any reason that should increase my net worth. I just converted something of value (car) into something else of value (dollars). You can’t say cars don’t count because they depreciate, because then dollars wouldn’t count, either. :)

        • saladdin says:

          This is the problem. I could sell my sperm at a donor bank. Should I include that?

          Meaningless numbes.

          saladdin

          • Soccer9040 says:

            If you want to talk technical accounting….specifically revenue recognition, then no you can’t count it. You havnt made the “sale” yet. You dont have cash in the bank or a receivable.

            These reports are as useful as you make them. Im starting to think you just dont like them…no matter how they are made.

  9. Daniel says:

    I like the comment about consistency over methodology. Methodology would only matter if you were trying to compare your net worth to someone elses. And of course, this is a bad idea.

    My wife and I have been tracking our net worth for almost three years now. I personally have never even considered listing my cars as assets.

    It’s very motivational to me, to look back over the months and years, and to see the consistent growth we’ve achieved.

  10. Tony says:

    I’ve been tracking my Net Worth since 1998 using Quicken / MS Money. In 2001 I switched to MS Money and it was way easier than Quicken but Microsoft decided not to support it anymore so I had to switch back to Quicken. Unless you are a highly skilled Vbasic programmer in Excel is going to be unlikely you can get the kind of detail reports you get with Quicken.

    You may exclude anything you want from your Net Worth, but Net Worth is defined as “Assets – Liabilities”. A House is an asset, a car is an asset. It doesn’t matter if it depreciates or not. I have a 40K car paid for, so I’m not suppossed to include it in my NW? Crazy. The key is pricing the asset correctly: If your house is “worth” 200K remember that to sell it you will probably incurr in real state fees and realtor comissions that should be reflected in the assesed value.

    I do agree that the key is consistency. If you’ve been tracking NW in a certain way just keep doing it that way so when you look at your progress overtime it makes sense to you.

  11. I use excel.

    Networth is just one “stat” to use, and while it is gratifying it doesn’t tell you that much. For that reason my Glorious Excel File (it has so many tabs, it’s name needs to be capitalized), spits out a whole bunch of metrics that tell me much more. Examples:

    Savings discipline
    * Cash savings / Total income
    * Total savings / Total income

    Financial health
    * Cash / Living expenses
    % Liquid assets / total assets

    Networth progress
    * Networth / Total annual income
    * Networth / Total annual expenses
    * Networth-Real estate equity / Total annual expenses

    Retirement readiness
    * Investment income / Living expenses

    Asset mix (% of assets in ..)
    * Stock market
    * Real estate
    * Cash

    Nerd: yes. Does this help me: yes. I am overdoing it and beyond the point of diminishing returns: clearly

    To be fair however, I added these metrics over the last 5 years or so, and the excel sheet slowly ballooned

    • Laura says:

      Ooh. thank you. i’ve often wondered why people keep track of their net worth. I sort of kept track of it while we were in debt cuz i wanted to see that negative number get smaller.

      But now I keep track of the numbers a different way. I only care about what you call Retirement Readiness. I don’t think in terms of net worth. I think in terms of monthly income. Right now we have so little saved that in order for our retirement to last, we can withdraw only $125 per month (today’s dollars) from our savings. Putting extra money in the bank to have $4m one day instead of $3m isn’t enough of a concept to discipline me into going through with saving the extra dough instead of spending it. $3m sounds like a lot! but translating how much we will have to live on into today’s dollars does hit home.

      • Soccer9040 says:

        I’ve never thought about it like that, but its an interesting concept.

        If I understand correctly, you are taking what you have now, converting it to some sort of monthly income figure based on perhaps what you could get an annuity for.

        I like that because once your income passes your monthly expenses you are truly free. That is when you can retire.

        • Laura says:

          Exactly! Isn’t it a great way to motivate yourself? I know it’s not for everyone, but I like it.

  12. Maddhatter says:

    I disagree with the credit card not being part of your networth from the same idea you suggested on cars and houses. For the following reason – if you switched to a cash only system your networth would have a drop off as you spent money so your first month would show a decrease that wasn’t real. I personally add credit cards even though I pay them off every month.

  13. Shirley says:

    While I don’t track net worth, I do track monthly income and outgo (everything, even money to the kids’ savings acounts)in a plain excel spreadsheet. It is mostly to track how we are spending money and in what areas we should possibly cut back. I wish I had started this 10 years ago!

  14. otipoby says:

    Strictly speaking, you should include cars in net worth. All assets, including the clothes on you back, should technically be included for an honest to goodness evaluation. Companies even include the value of brand names and other intangibles on their Balance Sheet. The question is whether it is worth the trouble. Public companies are required to do it to accurately reflect Shareholder Equity (Assets – Liabilities).

    Me, I include my home and cars and take a swag at increasing the former and decreasing the latter every year. But honestly, this number doesn’t mean much to me. What matters to me is LIQUID assets and total liabilities excluding mortgage. I use this to calculate my savings buffer / emergency fund.

  15. Mark Baldwin says:

    I’ve been tracking Net Worth since the mid 1980′s. I’ve always been an entrepreneur with multiple sources of income in very inconsistent patterns, so it’s pretty much the only tool I can think of to give me a big picture.

    As for method, I track everything I own, but value them at what I would describe as quick cash value (i.e. liquid value). What would I get for my house after cost if I needed to sell it in a month? What would I get for my cars?

    And certainly, something like cars or a house needs to be in the net worth. If I buy a $40k car, my net worth certainly didn’t magically go down $40k, so I shouldn’t see that type of drop. Instead, I probably would see a $5k drop in my net worth. The same applies to a house or a home mortgage.

    Mark

  16. zapeta says:

    I don’t currently track my networth, but I am going to start just so I can get a big picture of where I’m at. I don’t think the method is as important as just doing it consistently.

  17. Aaron N. says:

    I just use NetworthIQ to track mine. Though admittedly it’s not as flexible as creating your own spreadsheet, it’s much faster.

  18. Jamie says:

    Jim, please explain the use of color in your spreadsheet. Also, it seems like you have a lot more columns than you described. What’s in the extra columns?

    • Jim says:

      Ah, don’t get distracted with the colors :) . Green is total, sky-blue is liquid assets (the left column of blue), baby blue is retirement assets, and orange is liabilities.

  19. Soccer9040 says:

    Jim – Why do my comments go into moderation sometimes, but not others?

  20. AustinMorgan says:

    I’ve been going back and forth on what to include. I recently added my car to the equation since I’ll be selling it when I leave Japan in a couple years.

    I loved the advice about doing what works for you. At first, I followed someone’s guide religiously but I’ve slowly figured out that net worth depends on the person.

    Austin @ Foreigner’s Finances

    • Jim says:

      If you’re just starting now and you know you’re going to sell the car, I’d include it. When you do sell, your net worth won’t jump simply because you’ve converted an asset you weren’t counting (car) into one that you are (cash).

  21. eric says:

    I agree that as long as you’re consistent then that’s what matters. You have an accurate metric to compare.

    • saladdin says:

      I know I am way past repeating myself.

      But who cares if it is consistent if it is still not accurate. If I only eat Burger King for lunch every day fort he rest of my life I am consistent but that doesn’t make it good for me.

      I can only cheat on my girlfriend with her sister, that’s consistent, doesn’t make it right.

      I just don’t get it. Networth is like batting average in baseball. They may be consistent in the formula but that doesn’t make it an accurate tell of the players/investors skillz.

      saladdin

      • Soccer9040 says:

        I know I’m repeating myself too, but if you are talking about an investors skillz, how do you measure?

        A financial manager doesnt measure his success by how sweet he thinks he is, or by how many clients he calls on each day, or the fact that he can eat two chipotle burritos in one sitting. No, he measures his success based on how much money he is making and subsequently ADDING TO HIS CLIENTS NET WORTH. To know if you are adding (making money) you need to have a baseline. That baseline is called your Net Worth.

        Net Worth is not a strictly defined calculation like everyone above has said. People use a whole host of things to estimate their worth and then track its progression.

        Net worth as a single number is worthless, you are correct in that matter. Net worth as a series of points on a graph tells a story about what direction you are heading.

        If you don’t get past the “plot your net worth on the graph the 1st time” you will never get to the 2nd point and 3rd and so on. Without that you never know where you are going?

        The ball is in your court.

  22. tbork84 says:

    I have been keeping an excel spreadsheet with my net worth calculation, but I just tried mint.com and am very impressed. Not a bad tool to keep on hand, but I will definitely keep tracking my net worth and expenses via spreadsheet as well.

  23. Don C says:

    I started doing this as a reason to learn Excel for work. That was 12 years ago. I’ve learned a trick or two over the years. Now, my “simple spreadsheet tunrined into a 20+ tab worksheet that tracks just about everything.

    One thing I do a little differently is that I show the home value at the net amount if I were to sell it at FMV. If my house is worth $500k and it costs $25k to sell it (commissions and closng costs), then I would show it at $480k.

    I also taken it another step further and projected the net worth into the future to help plan for future costs (college, pool, etc.)

  24. Chewbakka says:

    I have a few questions:

    1) Is there an already made excel spreadsheet anywhere that you might recommend just for standard net worth calcs?

    2) Is there a site that provides net worth value segments? In other words, what’s considered a healthy net worth, by rule of thumb?

    3) Lastly, how can one consider 401K part of net worth when it will be taxed on the way out? One can certainly assume a tax rate calculation and then add it in, but is there a general rule here.

  25. Mark says:

    I have been doing a similar monthly calculation since mid-2009 and I am glad to see that I am not the only person (my wife thinks I am nuts). I do not include the cars or house/mortgage. I dont include the cars because they are paid off and I plan on driving them into the ground. The house/mortgage is wash. I think it is an excellent way to see how your investments are going (bonds/stocks/401k/IRA/Lending Club/etc) and maybe see a light at the end of the tunnel, a projected retirement day. It really drives home the value of money for me. A dollar saved today, could be an hour closer to retirement in the future.


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