Why track Net Worth?
As we go through this life, there are so many distractions. It’s so easy to get sidetracked from the things we “should” be doing or even maybe more directly what we REALLY want to be doing. We see it time and time again, friends want to start a business or save money, or buy real estate, but instead, go out and buy a new car or spend their time frivolously which goes totally against their supposed long term goals.
We are not immune to these forces either. It happens to the best of us. Sometimes it’s tough to have self-control, and instead, we make dumb purchases or spend our time unwisely. However, the one thing we’ve found to help us primarily keep true to our long-term financial goals is to track our personal Net Worth. Why track Net worth and not income or expenses or something else? Well, it’s because net worth is the core metric that will determine how financially fit you are. If you only track your changing income, you might think you are sittin’ pretty, but come to find out you have also been increasing your spending as well. If your lifestyle rises at the same rate as your income, then your net worth is flat, and you are no closer to exiting the rat race. Therefore we track net worth, and we track it vigorously to make sure we reach our goal of financial independence. As Peter Drucker said, “What gets measured gets managed.” We firmly believe that at The Stealthy Rich.
What is Net Worth?
Net worth is taking your assets and subtracting your liabilities. Which in its simplest terms, is considering what you own that has value and substracting the debt you have. Hopefully, you are left with a positive number! (If not, don’t fret, once you start tracking your net worth and working towards improving your financial health, your net worth will shoot up in no time.) Essentially it measures your financial health.
Net worth provides a snapshot of your current financial position. Positive and increasing net worth indicates good financial health, while a decrease would be cause for concern as it might be indicative of poor choices or a lack of financial focus.
How Do I Improve My Net Worth?
While it might be evident to some, there are two ways to improve your net worth. Either you increase your assets, or you decrease your liabilities. Of course, your assets can be in many different forms: cash, securities, real estate, businesses, insurance, etc.
How and When Should I Track My Net Worth?
I personally take my Net Worth “Snapshot,” once a quarter; however, you could do it as little as once a year if you have a good budget rhythm and generally trust yourself. I like to see it grow, so I track it as often as I can…
