How much are you worth?

You’ve probably heard about net worth in discussions about billionaires and celebrities. Jeff Bezos’ net worth is a constant topic of contention in political discussions. I think those discussions are important to have, but what I find much more important is understanding what net worth looks like to the average person.

The cool thing is, there’s a very simple equation to determining your net worth:

ASSETS – LIABILITIES = NET WORTH

Add up all your assets, subtract any liabilities you have from them, and your net worth is what’s left.

Some examples of assets include your cash, investments, any item which you own (especially items which make you money, like a computer), and real estate. Liabilities can take the form of credit card debt, car or student loans, and your day-to-day expenses (such as groceries).

Many people will be unhappy to find out that their net worth is actually lower than zero. Credit card debt, a bad investment, or an unfortunate medical emergency can be all it takes to bring your net worth into the negative.

Tracking net worth manually

The first way to track your net worth is manually, through programs like Microsoft Excel or Google Sheets. The benefit of doing this is that you have a more hands-on approach to your finances. You have to do the calculations, and it puts more weight into your purchases, investments, and losses.

In my experience, manual tracking of net worth is also extremely effective in keeping your financial goals in mind. Since you’ve always got your planner in the back of your head, and you know you’ll be typing in all your transactions, you’re less likely to splurge on things you know you don’t need.

I’ve created a Monthly Budget and Net Worth Planner for you to use if you like. It’s on Google Sheets, so you can easily transfer it to Microsoft Excel if you prefer that program.

Tracking net worth automatically

The second method is through third-party software.

What’s nice about personal finance software is its convenience. You just have to give it permission to view your financial accounts, and it’ll aggregate everything for you in real-time. It’s clean, efficient, and very easy. In fact, these programs even have functions which allow you to make your own money goals and budgets.

I want you to note that all of these money tracking programs have their ups and downs.

My software of choice is Monarch Money. Because Mint got shut down, I transferred my information to Monarch. In my opinion, they’re the best alternative on the market and have been very supportive of ex-Mint users.

Also, consider using GnuCash, which is an open-source accounting software. It’s not as pretty, and it’s more manual than Monarch, but it gets the job done. Plus, you don’t have to provide access to your financial accounts.

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