This post was originally published in early 2009, but brought to the forefront as I believe it’s one of the more important strategies for growing wealth.
For those of you who have been following my journey, you’ve probably noticed that I’m a big believer in tracking and managing progress to help achieve desired goals. I can’t believe I haven’t explicitly written about this strategy before as I’ve been publishing my net worth updates for several years now.
That is, if your aim is net worth (or any financial) growth, track and record it on a regular basis.
I started in late 2006 with a net worth of around $200,000 and it has grown over the years to approximately $960,000. Tracking your net worth is like giving yourself a grade every month (or whatever interval you like) and helps keep your spending/savings for the month accountable. The key is not to get down on yourself if you report a negative month, but to keep your eye on the long term trend and make adjustments along the way.
For me, just the thoughts of reporting my net worth publicly for hundreds of thousands of people to see keeps me focused on my saving, spending and investing habits. As a result, I often think about ways to increase my income in conjunction with ways to reduce expenses, then sticking to my investment strategy.
How to Track Net Worth
To start, net worth is your (total assets) – (total liabilities).
- Real estate – primary residence, rental properties.
- Investment portfolios – RRSP/TFSA, non registered, pensions.
- Business Value (if applicable) .
- Cash – chequing, savings, GIC’s etc.
- Tangible items – cars, collections etc.
- All Debt – mortgages, line of credit, student loans, credit card etc.
- Tax liabilities – business income taxation, large RRSPs, and/or capital gains owning.
- Other Money Owed.
Net Worth Tracking Tools
There are many tools that you can use to track your net worth progress. For me, I like to keep it simple so I use a spreadsheet to figure out the difference between my assets and liabilities at any particular point in time. Here are some free tools that you can use:
- Google Spreadsheets (check out the household balance sheet template that tracks net worth by month)
- Open Office Spreadsheets
Here is a free Excel based net worth spreadsheet that includes a nice looking pie chart. This one is geared towards the US, but you can change the account labels to whatever works for you.
Net worth isn’t the end-all-be-all of financial status, but it’s a great place to start to see where you stand financially. It’s not about what your number is relative to others, but that you are making progress in the right direction over the long haul.
Do you track your net worth on a regular basis? At what intervals?