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<\/h1>\n<\/h1>\nWhen many people talk about their personal finances, most of the focus goes toward income.\u00a0 And while your salary is important, a bigger determinant of your long-term financial success is to regularly calculate and track your net worth.<\/p>\n
This post starts off with a basic definition of net worth, why it\u2019s so important to track and finally how to go about doing so.\u00a0 Ready?\u00a0 Read on!<\/p>\n
The simplest definition I have for personal net worth<\/a> is the amount of money you\u2019d have left over after you pay back all the money you owe everyone else.<\/p>\n When you\u2019re a kid, this is pretty simple.\u00a0 Say you have $11.00 in your piggy bank and you borrowed $1.00 from your friend Kayla last weekend to buy a candy bar and a soda.\u00a0 You\u2019re current net worth would be $10.00 based on the following formula:<\/p>\n Net Worth = Total Assets \u2013 Total Current Debts<\/strong><\/p>\n $10.00 = $11.00 (in your piggy bank)\u00a0 – $1.00 (that you owe to Kayla)<\/p>\n As adults, we make things more complicated for ourselves.\u00a0 We\u2019ll get to that later so you know what to include and how to include it in your net worth calculation.<\/p>\n T Harv Eker is one of my favorite financial authors and speakers.\u00a0 His primary focus is helping people to change their money mindsets.\u00a0 In his book, Secrets of the Millionaire Mind<\/em><\/a>, <\/em>he talks about the importance of focusing on your money if you want to improve your personal finances.\u00a0 One of my favorite T Harv quotes is, \u201cWhere focus goes, energy flows and results show.\u201d<\/p>\n Think about this in terms of your personal relationships.\u00a0 I\u2019m guessing you spend lots of time focusing on family members, friends and important relationships with co-workers.\u00a0 And over time, this focus bears fruit, these relationships expand and pay big dividends for you and those who are in your inner circle.<\/p>\n Your relationship with money (or anything else for that matter) is no different.\u00a0 When you place your focus and attention upon something, it is much more likely to grow than if you completely ignore it.\u00a0 By calculating your net worth on a quarterly basis, you set these forces in motion and are much more likely to achieve your personal financial goals as a result.<\/p>\n Net Worth = Total Assets \u2013 Total Debts<\/p>\n Let\u2019s start with Assets.\u00a0 Open up a spreadsheet and create entries for any of the following categories that apply to you:<\/p>\n For the following categories, simply grab the current value from your records, a recent statement or by going online:<\/p>\n I personally grab values for these kinds of assets every time I calculate my net worth, which is once every 90 days.<\/p>\n There are other categories that I only calculate once a year to save time.\u00a0 These include:<\/p>\n It\u2019s up to you whether you want to determine the value of these items every time you calculate your net worth or limit it to once a year.<\/p>\n Bigger assets that I do calculate quarterly include:<\/p>\n Finally, there are some more difficult to calculate categories including:<\/p>\nWhy is it Important to Track My Net Worth?<\/h1>\n
OK, So How Do I Calculate My Net Worth<\/strong><\/h1>\n
Recall our formula above:<\/h4>\n
Assets<\/h2>\n
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Valuing Assets<\/h2>\n
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