Easily Track Your Net Worth
10 Sept, 2023
One of the critical behaviours that financially independent Kiwis have in common is that they track their net worth monthly. I’ve “properly” tracked the net worth of my whānau since 2015. I’ve watched it grow from $650,000 to $1,400,000. I’m resisting the urge to add an exclamation mark here.
While researching for this blog post, I remembered that before 2015, when I began tracking things on my computer, I used to write it down on paper each month. This memory sent me rummaging through some old paperwork, and I found that I actually started keeping records 14 years ago, way back in September 2009. Our total net worth back then was $385,000. This included our $300,000 home. Realising that we have grown our net worth by $1,100,000 in 14 years is motivating, to say the least, particularly given our work-life balance. We have come a very long way in the intervening years, and had I not kept a record, I’d not have believed this growth to be possible. But it’s true; the numbers don’t lie.
I’d forgotten that I also started tracking our daughter's net worth in 2009 when she was almost two years old. I’m not yet confident, but I am forever hopeful she will thank me one day. It was $2,300 (made up of KiwiSaver of $1,100 and a $1,200 investment in something that I didn’t see fit to write down the name of!) Today, she is almost 16, and her net worth is $34,000. Astounding! She is now diversified across multiple assets. Her net worth indicates what small investments (approximately $100 each month) compounding over time can grow into. I blogged about them HERE and shared an image of the net worth spreadsheet I hand-wrote for her.
Your net worth is a simple measure of whether your wealth is growing or declining over time, and it’s been my observation after seven years of blogging and observing others that it is very, dare I utter the words, easy for the majority of people to improve their financial position. With some planning and sacrifice, it is absolutely within many of our control to improve our financial lot in life.
Tracking my family's net worth has been the most helpful tool in determining whether all the mahi I’m putting into my family's finances is paying off.
I want you to track your net worth each month, and this blog post intends to show you how. Like all of my financial behaviours, I keep things relatively basic.
If you want to start with pencil and paper, that’s perfect!
If you want to start creating your spreadsheet on your computer, that’s perfect!
If you want to use an online net worth tracking tool, that’s perfect!
It does not matter how you do it; you just have to find a method that works for you and commit to updating it monthly. If you love nitty-gritty detail, put it in, or if you don’t, leave it out! Your net worth is uniquely personal. No two are the same. My net worth is irrelevant to you, as yours is to me.
ASSETS - DEBTS = NET WORTH
You calculate your net worth by noting down your assets (which are things that put money in your pocket, such as KiwiSaver) minus your debts (things that take money out of your pocket, such as a car loan).
I created a spreadsheet on my computer, which has evolved over the years, using simple math formulas, and I’ve created a read-only mock-up for you. It’s loosely based on how I organise my spreadsheet, but I’ve added in some debt to show how to account for that:
Mock-up of a Net Worth Spreadsheet (Click image to enlarge)
I’ve purposely not given you a template to fill out, but you can find plenty of these online. I promise you will engage with your finances more meaningfully if you create it yourself and use titles and headings that resonate with you. If you build it from scratch, you will be far better at tinkering with it over time. It will evolve with you instead of you trying to make someone else's template bend to your will. Because I’ve created my own, I’ll always own it.
Put simply, I keep a running record of my assets and, when I had them, debts (aka liabilities). When we managed to pay off all our debts, when a new year began, I removed them from my spreadsheet and now only track assets. As investments have come and gone (Bonus Bonds, for example), I have tweaked and changed my spreadsheet, always keeping a historical record but keeping up with my current financial reality. When I scroll back through the years, I see previous investments I’ve long since closed, meaning my spreadsheet is a living and evolving document.
You will see it is in two sections: a Grand Total of assets minus debts and another section where I track the value of our house and cars. Debate is rife on whether you should include them in your net worth or not. I say “heck yes”, but I keep them separate. My car is worth something if I sell it, BUT it costs me money (and loses value) every single year. My house costs me monthly, BUT if I sold it, it would put money in my pocket because we own it outright. And, in my case, it’s worth ~$900,000. That’s a sum worth noting, I think.
The beauty is that you do you! If your net worth is very low, adding in anything of value is worth tracking because it makes you feel better about yourself. But the trick is not to kid yourself here and remember that a real asset, such as shares, puts money in your pocket. Your $2,000 iPhone is not an asset because it quickly loses value over time, but noting its value (particularly if you paid cash for it) will give you a feeling of accomplishment, I’m sure. Over time, you will add real assets, such as your KiwiSaver or a growing savings account.
Notes to get you started
The key is to update your spreadsheet on the same day each month. The 1st is as good a date as any. Create a calendar reminder for the day and time you will sit down and do it. There is no point setting it when you know you are nowhere near your computer!
The first of every month is the day I bounce out of bed. I log into each investment and bank account and note the value in my spreadsheet.
For each investment, I work out what we have personally contributed from our income because this gives me a rough idea of our savings rate, keeping a gentle pressure on us constantly to do more.
I add exact numbers to my spreadsheet but don’t include cents. e.g. $103,750
I create basic formulas to add up my columns of data; a quick search in your help menu will teach you how. Failing that, just use a calculator.
On January 1st, I visit www.homes.co.nz and find the value of my house. I use this value for the entire year. It’s a best guess.
On January 1st, I go to www.carprice.co.nz and find the value of our cars. They depreciate each year. It’s a best guess.
In regards to income, we earn both PAYE and self-employment income. I track all of our income and expenses using PocketSmith, and at the end of each month, it gives me my total income. I just use that figure even though we still have some tax to pay later on our self-employment income. That’s fine, and I don’t sweat that. Close enough is good enough.
If you have a business with bank accounts, include those, too, but group them together. You can set up formulas to show total net worth with or without them.
Colour code your spreadsheet! It makes it more interesting and easier to read.
On January 1st, I copy and paste my spreadsheet below the previous year and continue. This allows me to use simple formulas to compare a particular month with the same month during the last year, etc. If I want to see our total net worth in 2015, I just scroll back up the page. Simple.
Rough enough IS good enough.
I want to convey that I can monitor and track in much more detail, but I don’t need to. My net worth spreadsheet is the third piece of our family finances puzzle. I track how my investments perform, as I did in a recent blog post that you can find HERE. I also follow the daily and weekly ebb and flow of our pūtea using PocketSmith. But I’ve realised over time that basic data is OK; it’s the perfect check-in with how we are doing. My numbers tell me a story. They help smooth out a lot of the short-term noise you hear about money because if the past 14 years have taught me anything, good financial behaviours and habits grow our wealth over time.
Your monthly update needs to be fast and easy to do. That’s why I don’t worry about gross or net income; it would just send me down a rabbit warren. I’m not running a freaking company here, and the basics will suffice. As a matter of interest, I timed how long it took me to update mine: Exactly 5 minutes! It helps that I’ve logged into my accounts so many times that I know all the passwords by memory.
You may be richer than you realised
For five minutes once a month, I get to focus on our actual numbers. A true story is of a fabulous wahine I spoke with on a Phone A Friend call last month who looked at her mortgage balance (instead of guessing) and realised she owed ~$60,000 less than she thought! Boom, that's a decent increase in her net worth right there. It pays to stop guessing where you are and look at the facts.
Take action
Even if you think it’s all too hard, you don’t get out of it that easy. Ask yourself if you are just trying to avoid a roundup of where your pūtea is at because you know you are going to have to do something about it. If you do nothing else after reading this, I would love you to get a pen and paper, write a list of your assets and debts, quickly log in to each, and note down the balance. Put a reminder in your calendar to do it again on the 1st of next month. This is a FABULOUS start. Because if you can keep it up for a month or two, you will start to gather data about your financial life. And that will pique your interest. And when in 3, 4, 6 or 12 months you decide to go the whole way and create a more detailed spreadsheet, you will have some numbers to plug into it.
That is how I started! When I finally got interested enough to pay more attention, I was grateful for the data I had already collected.
It might prompt a considerable life change
Just like my friend above realised her mortgage was far smaller (and therefore felt far more achievable) than she realised, others have discovered that they were still going to work to earn money they would never spend. They already had enough! Imagine that you work out that your total net worth has grown to such a point that it can sustain you for the rest of your life. Work can then become entirely optional. I’ve heard this happen countless times. Sadly not for me yet, but it gives me something to look forward to.
The Donegans have written a very detailed blog post called How much are you worth, which includes a net worth tracker, but if you know of a net worth tracker worth sharing, please link to it in the comments section below. I’d love to hear your experiences about tracking your own money.
Righto, you have read right to the end of another blog post that ended up being longer than I intended, so please now go and take action: Grab a pen and paper and all of your passwords, and start logging into each asset and debt you have. Total them up! How’s it looking? Next month, repeat the same exercise…
