Net worth is the difference between total assets and liabilities. It is used to describe both the value of a company and an individual’s financial position. A positive net worth is obtained when assets are greater than debts. Similarly, a negative net worth can also be obtained when debts are greater than the value of the assets. By keeping track of your net worth you are able to plan on your finances using the information on the financial position. To do this you need to adopt various methods.
What’s the Best Tools To Track Your Net worth?
There are many methods employed to track your net worth. One is ensuring that you hold yourself accountable for every purchase no matter how small it may be. You should not only consider large expenses like the purchase of furniture but also consider the expenses on the purchase of small things like delicious food. You can also track your net worth by corning up with budgets for all your purchases, this helps to keep track of your finances on a daily basis.
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These records should also be kept for future reviews. You should also ensure that the money you borrow for development projects is put to its intended use to avoid inadequacy in accountability which will make you lose track of your finances.
One should also divide and prioritize on the spending in terms of basic, secondary and tertiary needs to obtain an accurate entry on expenses. You should also calculate the net worth at the beginning of every month by deducting the sum of debts from the sum of assets. You should also ascertain all returns from your investments and other activities that contribute to your total earnings at the same time be able to pinpoint your credit value. You should also purchase the necessary tools like calculators and software to calculate your net worth.
Why Not Just Use Spreadsheets?
Keeping a personal spreadsheet is also necessary to ascertain your financial position at the end of the year. This is done by adding all the monthly balances to obtain a grand total. A negative or a lower positive value suggests that you need to reduce your expenses. Coming up with a financial plan which captures your long term and short-term financial goals is also recommended. Always come up with a budget for accomplishing these goals and develop a habit of doing net worth checkups on a regular basis. At the end of the process of keeping track of your net worth, you will realize an increase in your value in monetary terms.