Taking a look at what you own and what you owe is an important part of tracking your financial progress and is essentially how you calculate your net worth. For some, this might even be a much-needed reality check.
Doing this little bit of essential financial housekeeping allows you to see if you are paying down debt or earning savings for your retirement. You can then set a realistic financial goal. Ideally, as you continue to earn and save, your net worth will grow. If your net worth is low or in the red, you’ll need to work on saving more and spending less. To watch your progress, calculate your net worth now, and recalculate it once or twice a year.
First of all, let’s look at what exactly “net worth” means.
Net worth is simply the amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure of how much an entity is worth. If you have more debts than assets, you have a negative net worth.
You can discover your net worth by inputting all of your financial data on a spreadsheet. While this has the drawback of human error and also time consumption, it does keep your information private and offline. Here are some things to consider when doing this:
1. List your assets (what you own), estimate the value of each, and add up the total.
- Money in your bank accounts
- Value of your investment accounts
- Your car
- The market value of your home
- Business interests
- Personal property, such as jewelry, art, and furniture
- Cash value of any insurance policies
2. List your liabilities (what you owe) and add up the outstanding balances.
- Car loan
- Credit card balance
- Student loans
3. Then subtract your liabilities from your assets to determine your personal net worth.
However, if you choose to use the help of online tools, it is comforting to know that online security is hardly the risk it used to be, and there are a few relatively safe and easy things you can do to track your net worth. 
An online net worth calculator provides an automated way to track your net worth that does not require you to reveal personal information. Typically, online calculators feature boxes that you type the value of various assets or debts into. You press "calculate" to find out your net worth. While you usually cannot save the results, you can take a screenshot of the calculator and save the image for your records. Compare the images from time to time to see how your net worth is changing.
However, you decide to do it, keeping track of your net worth is an important step in staying on top of your personal finances.
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
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