Finances, Homemaking, Life Hack, Money, Saving Money

Why Tracking My Net Worth Has Been a Game-Changer (& Why I Think Everyone Should Do It)

If you would have asked me what associations I had with the idea of tracking my net worth a few years ago, I might have told you that it conjured up images of Prince John in the Disney movie Robin Hood–in other words, someone who greedily counted every coin and dollar and was constantly thinking of ways to leech more money from the environment around them to add to their own wealth.

Now, I didn’t think this because I’d given the matter any serious thought–I would have simply found the idea of tracking my own wealth to be a little obsessive, and as the Bible teaches us that the love of money is the root of all evil, I would have figured I’d best steer clear.

However, in the years since, I have gained a more nuanced appreciation for all things personal finance–I have learned that it’s vitally important to be good stewards over what we are given, and I have learned that good money habits ease stress, help me to feel more secure in case of emergencies, and even bring me happiness (when applied the correct way, such as being able to share experiences with those I love and being generous with those around me). So, for years, I have been tracking where each dollar gets spent, and I’ve regularly made a loose monthly budget for several years, adjusting it throughout the month as needed.

But I still hadn’t jumped on the net-worth-tracking bandwagon. In fact, I didn’t even KNOW about the net-worth-tracking bandwagon.

And then I found the blog Budgets are Sexy, where the author has been tracking (and posting) his net worth stats monthly for a decade. At first, I just read because I’m a closet personal finance nerd who likes seeing examples using real numbers of how other people manage their money. And then I started to see the wisdom in tracking every month–what it might encourage me to do differently, what it might bring to the forefront that I’d largely let fade into the background of my financial consciousness.

So, back in August of last year, I decided to start tracking my own.

Related Post: Why We Converted Our Old 401K to a Roth (and Lost an $8000 Tax Return)

I made it simple—I opened up a new spreadsheet in my Google Drive, I signed up for a (free) Personal Capital account, and I started keeping track of my overall net worth (or I should say, OUR overall net worth, as Matt and I have completely combined all of our accounts).

While it’s beneficial to track the total number period, it’s much more beneficial to see everything that’s feeding into that number, so at the top of my spreadsheet, I made the overall number large, then I broke down the important things funneling into that total number below it: our retirement accounts, our savings accounts and sinking funds (we currently have 6 for various categories like an emergency fund, car repairs, medical bills, etc.), our home value (as estimated by Zillow), and our debts (our mortgage balance and any balances on our credit cards, which we pay off monthly).

It might sound dramatic, but it’s no exaggeration—

THIS HAS COMPLETELY CHANGED MY LIFE.

Now, if you know me at all, you’ll know I’m pretty good with money. I kind of always have been. So I hope you can appreciate what a Big Deal this has been for me (someone who thought she was pretty awesome with money to begin with).

Here’s why.

Related Post: How We Bought a $205,000 Home Making Less Than $35K/Year

1.Tracking my net worth has made me focus more on the “bottom line” things–in other words, the things that produce actual wealth.

  • In day to day life, it can be easy to get caught up in the idea that your wealth is based on what’s currently available to spend in your checking account. More often than not, this way of thinking makes me feel a lot more poor than wealthy (ha ha). Filling out my spreadsheet every month helps to take something pretty abstract and intangible (investments, real estate worth, etc.) and put it into a concrete format. It also helps me to not put off those smart financial moves that my future self will greatly thank me for, such as funneling money into retirement and paying down our mortgage faster than the 30-year period we signed up for.

2. Tracking individual categories every month gives me a sense of pride and accomplishment when I can actually see those numbers changing every month.

  • For the past several years, I have consciously put money into savings whenever possible. However, actually seeing those totals each month laid out in spreadsheet form is a lot more motivating than just knowing that I managed to squirrel away a couple extra bucks that month. I also find it very motivating to watch our only real debt (our mortgage) go down every month, and it makes me excited for the day when we can start contributing a lot more to paying that off early (because right now, we only pay about $35 extra on it a month).

3. Tracking the entire picture of my net worth helps me to notice trends in the markets (such as the stock and housing markets, for example), and it also shows me where I can exert control and where I can’t.

  • The last few months have been a bit of a beast on our investments, to say the least. During months such as these, it is incredibly helpful to see that while the lines with our retirement accounts may be going down, the lines containing our savings figures are going up. It’s also good to see that when the markets are up, it’s sure fun to watch that compound interest work in our favor.

4. Seeing a very clear visual representation of the accumulation of my daily financial choices helps me make better daily financial choices.

  • As I said before, I’ve always been pretty good with money, and I’m definitely not a frivolous spender or anything like that. However, when I started to see each month the impact my daily choices make on my financial bottom line, we started making some changes around here. For starters, we took all of Matt’s last raise and used it to start contributing to retirement again. (We’d had to stop because his current job doesn’t offer retirement benefits and the purchase of our home last year had left us no wiggle room for quite awhile.) If I hadn’t started tracking our net worth, it would have been too easy to put off those contributions until we had a bit more room in our budget, or maybe we just would have put a part of the raise into retirement, rather than the whole thing. Having this monthly checkup helps ensure that we don’t keep putting off those decisions that will make the biggest difference to our bottom line.

If you’re wanting to start tracking your own net worth, Personal Capital is a great place to start (and it’s free!). You can link your account to all your investments, credit cards, bank accounts, mortgages, etc., and it will give you a snapshot whenever you log in of your net worth, of your investment portfolio, of your monthly spending categories, etc.

But I recommend going farther than just Personal Capital—I challenge you to bust out a spreadsheet with all the main factors contributing to your net worth and track it on the same day of each month (I always do it on the last day of the month). Plug in your numbers monthly, calculate the differences in each category, and put your overall net worth somewhere big and prominent so you can see its progress…and then see if you don’t start making some significant changes in your financial life.

I dare you.

***Note: those are my personal affiliate links for Personal Capital in this post, which just means I get credit towards an Amazon gift card if you sign up through my link. Even if you choose not to go through my link, however, Personal Capital is still a great tool I definitely recommend! I personally use it almost every day.

Oh, and one more thing–you’ll notice that I recently totally revamped my site design, and that now I have a whole featured content area totally focused on personal finance and frugality! If you haven’t checked it out yet, you’ll find it here.

Some posts to get you started:

Why We Converted Our Old 401K to a Roth (and Lost an $8000 Tax Return)

Do you track your net worth already? If so, how long have you been doing it?