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Should You Track Your Net Worth?

Well, should you?

I first calculated our household net worth a few years after residency. Although much of our net worth was in our home at the time (which in 2009 was worth a lot less than we had into it), and the investments we made starting in 2006 had tanked, we were still in the black with a low six-figure number.

I remember a few years later when we joined the “two comma club,” and could officially call ourselves millionaires.

The next major milestone occurred a few years ago when I realized that our net worth included retirement savings sufficient to support our annual spending indefinitely. We were financially independent.

If I was oblivious to our net worth, I would never have known I was in a position to retire early, and this site simply wouldn’t exist. I think you know how I would answer this question. Let’s see how Passive Income MD answers it in today’s Saturday Selection.


Should You Track Your Net Worth?


I recently had a discussion with some of my colleagues regarding our personal finances. We talked in particular about retirement numbers and of course my favorite topic, passive income. Throughout our conversation, it quickly became clear that most of them had no idea how much they needed to retire or even where they were along the way.

In fact, most were not tracking what I consider the most important barometer of your financial history: your NET WORTH.

I liken the importance of knowing your net worth to the importance of knowing your basic vital signs, for example, your blood pressure. How can you know how healthy you (or your finances) are if you don’t track your vitals?

I’m sure some of you track your stock portfolio daily or your house value on Zillow on occasion. When it comes down to it, if there’s only one single number you track at all, I believe it should be your net worth. That number, more than anything else, is an overall measure of where you stand financially.



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How Do You Calculate Your Net Worth?


Net Worth = Assets – Liabilities

Simply put, your net worth is all of your assets minus all of your liabilities. Want to know what an asset is vs. a liability? I went into it in a bit more detail in The Difference Between Assets and Liabilities.


Add Up Your Assets


In brief, an asset is something of value that, in essence, could be turned into cash. To figure out your total asset amount, add up the value of the following items and any money (cash) you have in the bank:

  • Stocks & Bonds
  • Investment Properties
  • Businesses
  • Cash
  • Other investments

As a side note, there’s quite a bit of debate whether one should include their primary home in their net worth. Well, when I calculate my net worth, I do. It’s been often said that your primary home is a liability (and this makes sense to a degree), but if push comes to shove, you could always sell it and rent if necessary. However, when it comes to determining whether you qualify as an accredited investor, you need to exclude your primary home from your net worth.

I also don’t include personal property such as jewelry, furniture, vehicles, or collectibles for these calculations. I find it makes it overly complicated because some are quite hard to value.


Subtract Out Liabilities


Once you’ve totaled up all your assets, you have to subtract out your liabilities. These are things you owe, such as debt on student loans, your mortgage, cars, rental properties, credit card debt, etc.

Most of us start our lives as attendings with a negative net worth. We haven’t started making much money yet, and so haven’t had the money to build our asset column. At the same time, all that schooling and accumulating debt results in high student loan debt in our liabilities column.

Why You Should Track Your Net Worth


Tells You How Financially Healthy You Are


A positive net worth means that your assets outweigh your liabilities. A growing net worth means that you’re doing a good job building assets and minimizing your liabilities.

A negative or decreasing net worth tells you that you’re losing the battle to debt and perhaps need to make some changes.

Every time you look at your net worth, you’re going to have to look heavily at the amount of debt you carry. Some things like student loan debt are a necessary evil to some degree. However, in the liability column will also be consumer debt like credit card & car loan debt.

Knowing how you’re doing in that arena and how it’s affecting your net worth will consciously make you think about it. It may consciously or unconsciously affect the way you spend money.


Help You Make Smarter Financial Decisions


Seeing exactly how you’re progressing on a monthly basis can be very motivating, even if it only shows you that you need to improve in one area or another. It also helps you maintain focus on what areas need improving. Life doesn’t move in a straight line, and if you want to reach your goals, knowing where you’re at will help you do just that.

Having the focus on continuously increasing your net worth certainly helps put important financial decisions into one of two categories: decisions that build the asset column and decisions that decrease the liability column. I mentioned this above, but instead of spending money on things that decrease your net worth, you might end up spending it on things that beef up your net worth.





How to Track Your Net Worth


There are a couple of ways to track your net worth. The good old-fashioned way is by using a simple spreadsheet. You can use either Google Sheets or Excel, but either way, all you have to do is come up with asset and liability columns. Then set it up so that your total net worth equals your assets – liabilities.

Some people love doing it this way. Perhaps there’s something uplifting in typing out huge numbers in your asset column and at the same time, something painful in typing in the large numbers in your debt column.

This method is great because it’s free and very straightforward. It’s great to do it this way the first time because you get a deep understanding of where everything is coming from. However, typing out and finding every number individually is also very labor-intensive. I don’t know about you but I have savings accounts in multiple banks as well as portfolios on different platforms.


Online Platforms


The other way is by using some kind of software or online platform. I use Empowerand I love it. I’ve also heard good things about Mint.com. I like to track and assess my net worth at least once a month. What I don’t enjoy doing anymore is going to each website, logging in, and manually inputting each value into a spreadsheet. I’m all about saving time, so I don’t want to spend a long time calculating my net worth. Using Empower, I log in once, and it’s all there for me, with fancy charts, and it even tracks my spending. The good thing is these services are free as well.

So, I would recommend doing the traditional spreadsheet the first time and then see if an online option might work better for you.


So, Track Your Net Worth!


I speak with a lot of smart people who want to be even smarter with their finances. They want a life of financial freedom and go about it by reading tons of books and spending all sorts of money on pricey seminars and techniques.

Before doing all that fancy stuff, what they should be doing is tracking their net worth. Then they can truly evaluate their financial health and know how they’re progressing toward their goal. I can’t state how much of an impact doing this has made to my finances and my goals, and ultimately, it’s helped me achieve financial independence from medicine.



Do you track your net worth? Do you do it manually or by using something like Empower or Mint?

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16 thoughts on “Should You Track Your Net Worth?”

  1. Here’s why I definitely count my home:

    Say I have $1million In stocks and a house worth $500k with a $500k mortgage. My net worth is $1million.

    The next day I sell stock to pay off my mortgage. Is my net worth suddenly only $500k? I think not.

    • I think it’s important to track both. As you clearly illustrate, your net worth doesn’t change, but your liquid assets or investable assets do. For those of us that are not planning to significantly downsize our primary residence in retirement, it’s this second number that’s arguably a more important metric, since the investable liquid assets are the ones that are going to fund our retirement.

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  3. Glad I’m not alone when it comes to tracking net worth! I’ve got a relatively low net worth right now, so I include things like our cars to make me feel better haha. Once I get a good bit over the $100k mark, I’ll drop our belongings from our net worth and only focus on our investments/home equity.

  4. I had been using personal capital, but I think having one website with access to all your passwords makes you vulnerable. I know they describe their security as strong, but I think it’s too much information for a website that isn’t dedicated to security…

    • Remember PC is not “a website”. It’s a financial institution which manages assets. They are regulated by the SEC. they have security equal (or better) than most banks. They also don’t have your passwords.

  5. I’m a big fan of an aggregator like personal capital. In my household over decades I had like 14 accounts with SEP IRA 401K ROTH BANK BROKERAGE BROKERAGE 2 BROKERAGE 3 CREDIT CARD and my wife had several mirror accounts and keeping track of all that never happened. The aggregator I use is BD Reporting and can drill down to the actual stock and can look at multiple dimensions like taxable v pre-tax, fixed v equities and drill down in each of those dimensions. Personal capital has Monte Carlo analysis and efficient frontier built in so you get a state of the art risk assessment at no added charge. This Bogel style investing needs to be as mechanical as possible to capture the max gain. If you’re sitting with 300K cash scattered across 14 accounts your return plummets. I’ve read, though the market might return 7% the average investor captures 3% because of inefficiency and poor market timing while waiting for the downturn. I like my BD but for free personal capital is hard to beat.

    If you’re not invested you’re just pretending. Compounding only happens to invested funds.

  6. I own the property my practice is on and it has a SFH also on it that I rent out. I don’t include either in my net worth since I couldn’t own the practice without the property. I sometimes remind myself that I have another $1xxk in assets but I like to think of that as my net worth fluff money.

  7. I became a multimillionaire by calculating net cash, not net worth. Net cash looked at all my obligations… total credit card and mortgage balances, taxes owed, etc. … PLUS what would be needed to pay for kids’ colleges and grad schools, weddings, term and whole life insurance monthly policy payments until cash neutral, etc. To me these we’re personal obligations, same as debt.

    Put that up against actual cash in terms of investment accounts, savings, whole life insurance cash value, etc. The result is scary and motivating.

    Then I set a target net number for net cash in the double comma range that I knew would give my family financial independence for life. I have now tracked these numbers quarterly for 20 years or so.

    Net worth can follow, but is too fungible to be your base number in my opinion … what your house, cars, possessions, business are worth is subjective and typically over estimated.

    This approach gets you really focused!!

    Worked for me, anyway!

    Loved your article, right on the mark!

  8. Net worth is the only thing you need to track to see how you are doing. It doesn’t matter what you include in the numbers as long as you always do it the same so you can see the trend. I track mine on an excel spreadsheet I made about 30 years ago. I can see every quarter since then. I set up all my one-on-one financial makeover clients with the same.

    Dr. Cory S. Fawcett
    Prescription for Financial Success

  9. I couldn’t agree more. Starting to track my net worth was a first step to even thinking about financial independence. I went the spreadsheet route, and filling it out helped me think through some aspects of our finances I hadn’t spent time on before. (E.g. how to value a rental property, or a possible pension.)

    Once I discovered the FI community, then I started to use the old rough calculation to get a bit more sophisticated and separate out assets that aren’t income producing, etc.

    I haven’t started using Personal Capital, though I know i should for ease and a more frequent check. There is something satisfying about the spreadsheet, and it requires me to thoroughly go through everything. I also have a bit of fear that an instant calculation could trigger my obsessive tendencies. I’ll probably push through those objections soon.

  10. I’m a huge PC fan so I track it, but I use PC primarily for its aggregator function to look across all accounts for 1) activity which is also useful as a fraud marker as I see all activity not far off from real time 2) allocations across accounts.

    Whether to include home will always be of debate. I include it. I thinks it’s a little strange to not include it, but yet if someone has a mortgage that should be included. It is a large asset that could be sold for cash if I needed. The problem it’s somewhat problematic to know it’s true value because it’s only worth what someone pays for it at closing. Every other valuation is an assumption at best.
    At some level I know what is liquid vs not liquid. It’s not hard to extrapolate a home out of net worth…..

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  12. I have been tracking net worth and liabilities, along with expenses, since graduating from college nearly 30 years ago. I only count retirement savings and other investments, and put major items like the house in parentheses. Liabilities thankfully have been small, thanks to God Who provided strength for the journey through medical training and serving in rural health, a few scholarships and a wonderful spouse who avoids debt.
    My technique is writing on paper and a primitive Word document.
    I don’t understand spreadsheets well and I’m leery of online tools: what if they get hacked?
    Appreciate the above tips.

  13. I am very similar to PIMD in terms of what I include in my networth.

    I actually break my networth into two separate ones:

    The first I called my usable or retirement net worth. It includes all the assets that I will be able to draw down or that will provide a passive income in retirement. Thus I exclude the value of my primary home, all vehicles, 529 plans, jewelery.

    The second net worth is my total for everything (except I really don’t count cars and jewelery since that would be guessing value).

  14. That which gets measured gets improved. I’ve had literally the same exact Excel spreadsheet to track mine since 1997. She’s part of the family 🙂

  15. I might get the first response this time, in Iraq currently. I have been tracking my families net worth for over ten years now. For the past four or five years, I have been pretty good at updating it monthly on a spreadsheet. It is interesting to watch both the assets and liabilities, see where we keep impacting things paying down debt, or where the stock market causes a big swing. It is also good to see the assets move up faster the past several years in the bull market, but watching the debt continue to decrease reminds me it is not all just growing the asset column to see the net worth increase.


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