How to track your net worth
Written by Sean Cooper
Monday, November 5th, 2018
We all know the importance of regular checkups with our family doctor, but when it comes to our financial health, we sometimes fail to give it the same attention. While a budget is a helpful way to track your daily spending, tracking your net worth gives you the “big picture” of your finances and is one way of knowing how you're doing.
In a way, tracking your net worth is a lot like an annual checkup with your doctor. Your net worth shows you if your finances are healthy or if you’re living beyond your means. Building your net worth can help you achieve your long-term financial goals, like paying off your mortgage or retiring early. You might want to consider tracking your net worth if your goal is to see it grow.
How do I track my net worth?
Not tracking your net worth is a lot like driving without a map — you may reach your destination, but it could take you a lot longer.
The good news is you don’t have to be a math whiz to track your net worth. Here's the basic formula:
Net Worth = Total Assets - Total Liabilities
Your total assets are what you own. Examples include your home, investments and savings. Your total liabilities are what you owe. Examples include personal debt like your mortgage, line of credit, car loan and student loan.
While there are many tools out there for tracking your net worth, I find the simplest ones work the best. You can search for a net worth statement template online or even build your own.
The importance of goal-setting
Tracking your net worth comes in handy for goal setting. I find the most effective goals are SMART. SMART stands for Specific, Measurable, Attainable, Realistic, and Timely. For example, you could set the goal of achieving a net worth of $1 million at age 45. Once you’ve set your goal, you can figure out how much money to set aside each month to help reach your goal. Goal-setting helps keep you motivated. When you know how much money you should set aside each month, growing your net worth can be less intimidating.
How often should you track your net worth?
When it comes to tracking net worth, I find less is more. Unlike your budget, you don’t need to track it on a monthly basis. Here’s why: your net worth may barely budge from month to month. There’s no hard and fast rule, but I find tracking my net worth every three months is most effective. A lot can happen in a year and I'd rather find out my net worth has hit a bump in the road three months in, instead of a year later.
How do I grow my net worth?
Growing your net worth isn’t rocket science. The easiest way to grow your net worth is to live within your means. That means spending less than you make. The easiest way to achieve this is to pay yourself first. Automate your savings so you’re not tempted to splurge on purchases you can’t afford.
When it comes to your net worth, the trend is your friend. In other words, if your net worth is growing over time, it's a good sign. Similar to the stock market, your net worth isn’t set in stone and will change. You should aim to grow your net worth over time. Since each individual’s financial circumstances are different, there’s no rule of thumb when it comes to net worth. Instead consider setting your own goals and using your net worth statement as a road map for getting there.
Learn about the great features of Tangerine’s Mortgage, Home Equity Line of Credit or RSP Loan.
This article or video (the “Content”), as applicable, is provided by independent third parties that are not affiliated with Tangerine Bank or any of its affiliates. Tangerine Bank and its affiliates neither endorse or approve nor are liable for any third party Content, or investment or financial loss arising from any use of such Content....
The Content is provided for general information and educational purposes only, is not intended to be relied upon as, or provide, personal financial, tax or investment advice and does not take into account the specific objectives, personal, financial, legal or tax situation, or particular circumstances and needs of any specific person. No information contained in the Content constitutes, or should be construed as, a recommendation, offer or solicitation by Tangerine to buy, hold or sell any security, financial product or instrument discussed therein or to follow any particular investment or financial strategy. In making your financial and investment decisions, you will consult with and rely upon your own advisors and will seek your own professional advice regarding the appropriateness of implementing strategies before taking action. Any information, data, opinions, views, advice, recommendations or other content provided by any third party are solely those of such third party and not of Tangerine Bank or its affiliates, and Tangerine Bank and its affiliates accept no liability in respect thereof and do not guarantee the accuracy or reliability of any information in the third party Content. Any information contained in the Content, including information related to interest rates, market conditions, tax rules, and other investment factors, is subject to change without notice, and neither Tangerine Bank nor its affiliates are responsible for updating this information.
Tangerine Investment Funds are managed by Tangerine Investment Management Inc. and are only available by opening an Investment Fund Account with Tangerine Investment Funds Limited. These firms are wholly owned subsidiaries of Tangerine Bank. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.