The day I sat down and decided to track my net worth was the day my finances turned around forever.
As a college senior, I was finally able to see how quickly money was disappearing from my checking account. At the time, I had two part-time jobs and thought my income was more than enough to cover my expenses, while still having a good amount leftover for savings. I couldn’t have been more wrong.
It turned out I was burning through my paychecks and barely saving anything every month. After reading some personal finance books, I created a simple net worth spreadsheet in five minutes. That decision happened one year ago and I fully believe it will save me hundreds of thousands of dollars in my life.
The Importance of Seeing the Numbers
The most important aspect of my net worth spreadsheet is the place for percentage increase/decrease. After documenting my net worth for just two months, I was able to completely overhaul how I looked at money and saving by comparing the change from one month’s numbers to the next.
When looking at dollar amounts next to one another it can be difficult to grasp the difference. This was the problem with viewing my checking account. I would occasionally check my statement online to see how much money I had, but as long as a there wasn’t a huge change in the thousands place - for example $2000 to $1750 – I couldn’t really visualize how much money was leaving my checking account every month. I continued on my way spending $8 at Chipotle, $45 on a concert ticket, or $20 at dinner with friends. These purchases were adding up 100 times faster than I realized and finding my net worth finally informed of this.
As soon as I had a couple of months of data documented, the savings became addictive. For the first time in my life, I felt in control of my finances. Finding my net worth led to me tracking my expenses every month. The savings continued to grow as I learned where my overspending was located, and where I could save more the next month.
Now, on the first of the month I take five minutes to siphon all of my money accounts into my spreadsheet. I quickly make sure the numbers are headed in the direction I want, check for any huge discrepancies, and move on my way. Five minutes a month. That’s it.
How to Find Your Net Worth
Sign into each of your financial accounts. Find the amount of money in your savings, checking, and investment accounts. Also, count the money in your wallet and add all of those numbers together.
You may also want to estimate the amount of your car or house for a more accurate net worth number. Use Zillow for estimating house prices and Kelley Blue Book to find the worth of your car. You may also want to include any outstanding debts you have. This can include credit cards, student loans, car loans, or mortgages.
This is the template I use to find my net worth every month. Click on it to enlarge. Since I’m in Japan, I have more accounts than I would prefer, but this gives you an idea of how to go about setting up your net worth spreadsheet.
If you’d like to look at a variety of spreadsheet options check out Google Docs templates. If you’d like your own copy of my net worth spreadsheet, leave a comment below and I’ll send it your way.
My spreadsheet is missing a place for debts or liabilities. These usually include credit cards, mortgages, or student loans. I currently have two liabilities – a student loan payment and money owed to my predecessor for items in my apartment – that I don’t include in my net worth spreadsheet.
I realize emitting these debts doesn’t give me a 100% accurate net worth number, but I do this for three reasons.
One, the student loan is being automatically deducted every month from my savings account so I will still be able to track its effect on my finances.
Second, the loan for items in my apartment doesn’t need to be paid for six or more months and would just confuse my calculations. I will take a small hit to my net worth sometime next year, but I find no reason to include that specific debt in my monthly calculations.
The final reason is psychological. Keeping these debts out of my calculations keeps my overall net worth higher. This gives me extra motivation to keep saving and optimizing my money in order to keep that number high. Yes, my overall net worth will not rise as fast as it has in the past due to these debts, but I find it beneficial to omit my debts in order to keep myself saving more every month. The big debt – my student loan – is being automatically taken care of every month, so it is included in my numbers even if I don’t have a space for it on my spreadsheet.
Finally, you’ll notice on the right side of my spreadsheet that I keep a running total of every month’s numbers. I like having access to this information and being able to look back at previous months totals. I also think it will be awesome to look back at this when I’m 86 and know exactly how much money I had when I was 21. You don’t have to include this part in your net worth calculations, but I enjoy having the numbers available.
Finding and keeping track of net worth is something almost everyone can benefit greatly from. Once set up, it takes less than five minutes of your time every month. This simple change will get your finances moving the right way and allow you to finally take control of your money.
- Photo by nDevilTV
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You started tracking your net worth at university? Nice. I have always been fairly smart with my cash, but I only started tracking my savings etc about a year ago. It`s like a game now. An addictive one!
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Austin Reply:
October 10th, 2009 at 2:35 pm
Yeah, my spreadsheet starts at September 2008 which was my senior year. I wish I would have started tracking it the day I got into college, but hopefully this post gives people some motivation to track theirs.
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By definition, if you do not include Liabilites in your networth calculation, you are only traking your assest, not networth.
Also, I wanted to share with you and your readers the website http://www.networthiq.com. I have enjoyed using the website now for two years and its easy.
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Austin Reply:
October 14th, 2009 at 1:18 pm
Thanks for the heads up on the net worth website. I signed up for an account 6 months ago, but never really used it. Maybe I’ll try to get back into it.
As far as me only tracking assets – you’re right. However, my liabilities are being accounted for through automatic payments which will show – over many months – in my assets. Perhaps when I buy a car or house I’ll have to add a liability area to my spreadsheet.
Thanks for commenting!
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Tracking my net worth was a big step for my finances as well. I’m only a year and a half out of college, but I started tracking spending right after I started my full-time job out of college in June 2008. This helped me see what I was spending on and tighten things up a bit for my pocketbook, but didn’t really keep me from purchasing big ticket items if I worked some OT or got a windfall.
Once I started tracking my net worth this April my whole view on my finances changed. I realized how much money I’ve wasted in my life on “things” and got more focus on saving for long term goals (family, house, retirement, etc.) And just FYI, I use my only debt, which is student loans, in my calculations. It helps to keep it tangible.
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Austin Reply:
October 31st, 2009 at 5:35 pm
Yeah, after I wrote the post I thought about what I said about keeping my debt out for psychological issues. I inserted the debt on Mint so I can see what my true number is, but I’m still omitting it from my spreadsheet.
Thanks for the comment. It seems like we’re on the same page!
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