What is Net Worth?

They say you can’t manage what you don’t understand—and that couldn’t be more true when it comes to your finances! So, the first step before figuring out how to track your net worth is to understand what it is and then, of course, calculate it for yourself.

Simply put, your net worth is the difference between your assets and liabilities. To calculate it, just add up the total value of all your assets, then subtract everything you owe. And once you have that number, what does it really mean?

Well, this number is one of the most important indicators of your financial health. It gives you a clear picture of where you stand and whether you’re moving in the right direction.

How to Calculate Your Net Worth

To figure out your net worth, start by adding up all of your assets. These could include investments, retirement accounts, vehicles, jewelry, the value of your property, and the cash you have in your bank accounts. Once you’ve got that total, subtract your liabilities—things like loans, credit card balances, and your mortgage. The final number will give you the net worth and, of course, a solid understanding of your financial position.

Here’s a calculator that might help you with the math, or you can download this file and fill it out yourself.

Why Tracking It Matters

First and foremost, tracking your net worth is essential because it’s a key indicator of whether you need to make adjustments or if you’re on the right path toward financial well-being.

Second, the only way to improve your financial situation is by first calculating your net worth and then keeping a close eye on it.

Finally, it can be a motivating factor—you’ll know where you’re starting from, and it might give you that extra push to improve. Plus, each time you hit a milestone, it’s a reason to celebrate!

How to Get Started

Many tools help you track your net worth and simplify this process. Some of the most popular options include:

* Empower

* Betterment

* YNAB

* Mint

* Kubera

* Tiller.

These platforms can provide regular updates, insights, and tips to help you reach your financial goals faster.

Wrapping Up

Tracking your net worth isn’t just about numbers—it’s about setting yourself up for future success and making sure your financial decisions are in line with your long-term goals. Whether you’re just starting out or well on your way, taking a moment to understand and follow your net worth can help you feel more confident and in control of your financial journey.

Remember, it’s not just about where you are now but about where you’re heading. Keep track of your progress and celebrate your financial wins, no matter how small!