If there’s one thing that’s been a game-changer in my financial journey, it’s the simple practice of tracking net worth. Few financial metrics are as telling as your net worth. It’s the ultimate scorecard, a single number that encapsulates everything you own minus everything you owe. But here’s the kicker: tracking your net worth isn’t reserved for millionaires or financial experts. With just a spreadsheet and a bit of discipline, anyone can do it — and the insights you gain can be life-changing.
Now, before you roll your eyes and think this is another complex task that requires a finance degree (or at least advanced spreadsheeting), let me stop you right there. Tracking your net worth isn’t rocket science. With just a basic spreadsheet, you can get a clear snapshot of your financial health — and it’s a habit worth starting at any stage of life. In fact, I have my own kids do this (who are now teens and pre-teens). I help them, of course, but it allows them to see how the money is adding up across the money they have physically, money that may be in a savings account, and money in their UTMA accounts.
The Foundation: Breaking Down Assets and Liabilities
Once we start to make a list, we’ll want to categorize those items into categories. For example, I typically think in terms of buckets like taxable accounts (brokerage accounts, savings), pre-tax accounts (401(k), traditional IRA), post-tax accounts (Roth IRA, HSA), and other assets (real estate, vehicles, collectibles). On the liabilities side, you’ll want to include everything from your mortgage and student loans to credit card debt and any other obligations. For those who prefer a meticulous approach, I recommend also tracking receivables (money owed to you) and payables (upcoming bills) — it’s the fine-tuning that gives you a precise picture of your financial standing.
The beauty of this approach lies in its simplicity. By categorizing your assets and liabilities, you not only gain clarity but also a deeper understanding of how different parts of your financial life interact. For example, moving money from savings to pay down a mortgage isn’t magic. It reduces the value of assets, but then also reduces the amount of liabilities. (The value, of course, is in the future savings on interest.)
Why Net Worth Matters at Every Stage of Life
Let’s dispel a common myth: net worth tracking isn’t just for those nearing retirement or with significant wealth. It’s a practice that pays dividends (literally and figuratively) at every financial stage. I’ve even got my kids tracking their net worth, and they’re still in school. Why? Because it builds financial awareness and accountability early on. Understanding where you stand financially is the first step in making informed decisions, whether you’re saving for a house, planning for retirement, or just trying to avoid lifestyle creep.
Tracking your net worth over time also offers a powerful antidote to financial complacency. It’s easy to assume you’re on the right path, but numbers don’t lie. When you see your liabilities shrinking and your assets growing, it’s a reminder that your financial habits are working. Conversely, if things aren’t trending the right way, you can spot it early and make adjustments before small issues snowball into big problems.
Leveraging Technology: Automating the Process with Google Sheets
Here’s where things get interesting. While a basic spreadsheet is all you need, Google Sheets offers some powerful functions that can take your net worth tracking to the next level. With built-in stock market functions, your investment balances can update automatically, reflecting the latest market changes without any manual input. This is particularly useful for those of us who hold a mix of individual stocks, ETFs, or mutual funds across different accounts.
But automation isn’t just about convenience; it’s about accuracy. By having real-time data at your fingertips, you can make more informed decisions, whether that’s rebalancing your portfolio, adjusting your savings rate, or fine-tuning your retirement projections. Plus, if you’re like me and enjoy a bit of number crunching, Google Sheets allows for customization that’s limited only by your imagination. Want to track your compounded annual growth rate (CAGR) or build a self updating pie graph of your asset allocation? Easy.
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The Ritual of Reflection: Monthly Printouts
There’s a reason I’ve been printing out my net worth summary every month for the last 20 years. While the digital spreadsheet is great for day-to-day tracking, there’s something uniquely valuable about having a tangible record. Each printout serves as a snapshot of where we were at a given moment in time. Over the years, these printouts have become a chronicle of our financial journey — from paying off student loans and mortgages to growing our investments and watching our net worth steadily climb.
Reviewing these summaries isn’t just about nostalgia; it’s about perspective. When you see how far you’ve come, it reinforces the value of staying disciplined with your finances. It’s easy to get caught up in the day-to-day fluctuations of the market or the latest financial headlines, but having that long-term record reminds you of the bigger picture. It’s a powerful motivator to keep going, especially during times when progress feels slow.
Final Thoughts: The Power of Consistent Tracking
Tracking your net worth isn’t just a one-time exercise; it’s a habit that can transform your financial life. By categorizing your assets and liabilities, leveraging automation, and consistently reflecting on your progress, you’ll gain insights that go far beyond what’s possible with simple budgeting. You’ll see the compounding effect of your efforts, spot trends that might otherwise go unnoticed, and make better decisions that align with your long-term goals.
So, if you haven’t started yet, there’s no better time than now. Set up that spreadsheet, start tracking, and watch as the clarity and control you gain over your finances begins to change the way you think about money.