Do You Track Your Net Worth?

JD at Get Rich Slowly says that he doesn't track his net worth. He details his reasons why and acknowledges than many people think net worth is the most important financial measure.

I'm one of those people that thinks net worth is the single-most important financial measure. It's how I "keep score" with my finances -- I use it to determine whether or not I'm making progress. Sure, I look at a ton of other numbers (Quicken makes that easy), but net worth is the main figure I track.

That said, I don't obsess about it. I used to look at my net worth number a couple times every week. It went up or down (sometimes in big jumps) as the market went up or down. But that was too much for me. Currently, I look at my net worth once a month and that seems just fine to me.

So, here are a few net worth related questions I have for you:

• Do you track your net worth?
• Why or why not?
• If you do track it, how often do you look at your number?

I'm sure the comments on this one will be quite interesting. :-)

Comments

[Micro Manager]

Yes, I monitor net worth, down to the penny if possible with certain assumptions on items that do not lend themselves to that level of precision. I review and update it daily as a means of determining where I am with respect to my ultimate goal of being able to retire on multiple sources of "passive" income. This involves a rather sophisticated spreadsheet I have developed over a period of 10 years or so ...Quicken-like but tailored to my own requirements and situation.

[Dave]

Yes, I do track my net worth. I believe that net worth is the true picture of your financial well being. I use Quicken and once that program is setup it displays your net worth on your Quicken home page.

I really only look at it on a quarterly basis (this quarter is going to be ugly) and than put my year end net worth in a spreadsheet so I can see how it is doing year to year

[ed]

Do you track your net worth?

- Certainly do. Have done so since I graduated high school and will for the rest of my life. I am in my late 20s now. I set a monthly goal at the begining of each year and revisit the goal and make adjustments based on market conditions...... ect.

Why or why not?

- Gives me a means to measuring how I am doing financially.

If you do track it, how often do you look at your number?

- "Update" my net worth on a monthly basis, but I use MS money, so I guess one could say I look at it everytime I update my transactions, it it is on the account list page.

[ToughMoneyLove]

I absolutely track our net worth because (a) it is the best indicator of how we are progressing toward our long term goal of financial independence; and (b) a measure of our ability to withstand a financial crisis. Tracking net worth also helps you keep your eye on the big picture, and not on any one category of perfomance. I look at it several times a week as I am entering transactions and data into Quicken.

[liz]

yes. I'm seeing progress every month. I also have one of those YMOYL wall charts that tracks assets and liabilities so that's a big motivator.

Mine is negative so I try to not think about it. Nope, I don't track mine.

[Mark]

I have quicken also, so I can see it everyday, but really analyze it in a report fashion once a month or once a quarter.

based on all the recent events I'm contemplating calculating two net worths...a total net worth that would include the equity on my condo, and a financial net worth that just tracks my available cash + investments.

[dogatemyfinances]

I track my net worth because
* it forces me to check ALL my accounts for anything strange like, say, fraud
* I can see that we're going the right direction
* I can compare to other months to see if we are doing as well as before

[ryan]

I track mine monthly. I update to the dollar on the first after everything is paid.

It is a very important motivator. I do not gauge it against others, as i assume my friends at 27 are all negative. It is my own personal metric.

[Jeremy]

I track mine, but only as a general number. I don't get into getting it down to the penny since it can change so frequently. But I have a pretty rough idea of what the value of my assets are, and what my liabilities are, and that's good enough for my needs.

[Anonymous]

I track it as precisely as possible. I agree with a prior poster that tracking Net Worth helps force you to monitor all accounts appropriately.

Ultimately, when your Net Worth is large enough, even invested hyper-conservatively in CDs, it can replace your salary.

I find Net Worth is not a great way to set goals, however. The stock market has seriously battered our Net Worth this summer and fall. We were up 20% over our cost basis for all our investments in 2007, now we are flat even to a few % under. A few years from now, we may be considerably up again.

The point being is that assets such as securities and houses can have large value swings. Reaching a goal with a significant factor out of your control can be unfairly difficult to your efforts, and therefore discouraging.

Our goals right now are focused on building up our emergency fund to one month's expenses and vacation fund for next year. Once both are funded, we will move towards a three-monthly expense emergency fund.

[Strick]

I track it because I do think it is a good measure of financial progress over long periods of time (like year to year, or even longer like every 2 or 3 years). The month to month movements are too out of your control to be considered grades on how you are doing or to be a good motivator.

That said there are 2 numbers I consider much more important:

Motivator = monthly savings rate (saving+investing+extra mortgage payment divided by income) If my savings rate goes up, I am making better day to day decisions.

Progress = nest egg progress (percent of my yearly expenses that would be paid by a 4% draw on my current retirement account balance). Once this hits 100%, my view of financial freedom is achieved.

When I was younger, debt and cash flow numbers were of course more important.

[Kevin]

I track our net worth monthly after updating and reconciling all our accounts. I also have an annual goal on what % growth I'd like to see as well as a number goal I want to hit next June 30. I treat our finances as a business - and looking at both the balance sheet and income statement are essential to that.

JD may not track his net worth as a whole or have a report to look at, but I bet he could tell you what's in his bank account, investments, what liabilities he has, etc. Essentially the same thing.

[jack]

No I don't. I track two things: annual savings and net investable assets.

To me annual savings is the most important measure. Because in the end this is the one you can really do something about. I have a spreadsheet set up so I can log every investment entry and it gives me a running total, percent of annual goal realized, and a percent of income. I even track it by category of investment (tax deferred, taxable, etc). I use the same spreadsheet to track charitable contributions.

I do look at net investable retirement assets. And I know for some of you that sounds like thme thing as net worth. But it isn't. I'm not including in that my home, emergency funds, operating funds or other non-retirement savings. I know those are still assets of mine. But the fact is that none of those are designated for retirement. And most of us are only looking at our net worth because we want to see if we are making progress on our retirement goals. Which means we are purposely misleading ourselves if we use the net worth figure.

[Isabel]

No, I don't track it. Knowing that number would not have an impact on handle my finances. Also, there's too many moving variables for me to bother with: the value of my investments (which are almost all in index funds precisely so that I don't have to manage them too actively), the value of my house, the value of my belongings (which frankly I wouldn't even know how to estimate). The ROI for tracking my net worth is too low for me to bother with.

[Jon]

Yes, I track my net worth with MS Money, which I've used for about ten years now.
I think it's important to know how my investments are performing, so I can make decisions based on facts regarding future investments.
I try not to worry about it too often. I can see it any time I'm entering transactions into Money, if I want to scroll down the page, but in volatile markets like we've seen recently, it's not really a good indicator of how your strategy is working. My investment horizon for retirement is still out about 12 years, so I really only measure success from year to year by whether I've met my target savings goals or not. I'm sort of forced to look at performance more often by needing to enter funds purchases for all of my account on a monthly or quarterly basis, so as not to spend days doing it at the end of the year.

[Geoff]

I track mine on Networthiq mostly to keep track of where I've been so in the future I can be proud of where I am. I just track investments, retirement, savings, and loans. I only have one physical asset on there (a musical instrument) since it is not a necessity like a car and has a lot of worth that will grow. Since I'm paying tuition out of pocket it's not going very far, but I think it is a motivator at times, and will at least put my situation in perspective when I see what I started with.

[Ken]

I use Yodlee so it has a built in tracker. Just a few accounts are missing from it.

I checked it yesterday. 105k, today 103k after bad market day yesterday. Should go up tomorrow after 401ks get updated tonight. This also includes almost 3k of work expenses that will get reimbursed next week. Most my stock are up 5% today. So i should she about a 3-5k change tomorrow.

No worries though.

Only 25 so my wife and I have plenty of time till retirement.

Its fun to track. Although lately the stock market has not been so fun.

[BigBoy]

I do not track my net worth but i would like to - what is the best way to do this?
Any recommendations.

Thanks!

[CF]

Yes, in a simple Excel chart. I also have a column in which I include how much was invested in each account during the year. I keep track every few months or so, and do it because I want to know when I reach that magic number.

[MoneyBeagle]

I track my Net worth via an Excel spreadsheet that has evolved over the years. Initially it was to track stock market investments (I did some pseudo-day trading back in the tech boom days) and slowly added on parts and pieces. It still changes to this day.

I calculate it once per month and keep a snapshot.

Lately, our net worth has been getting hammered, because of the falling housing market and the battered stock market. Ours is probably down 30% in the last year because of that. To keep things positive, I have changed our 'measure of progress' to the amount of debt we have. We've committed to reducing our debt by as much as possible and so even if my net worth falls by $5,000 in a month, I still feel satisfied if the amount of debt has fallen by a larger than normal amount. Why? Because the debt payments are forever. The stock market and property values will, in the long run, recover.

[Jim]

I do track my net worth. I've been adding it up about monthly. I'm using NetworthIQ right now.

I track net worth because it helps me keep my eye on the big picture of my financial situation. My overall goal is to retire early so watching my net worth will track my progress towards that. I don't obsess over it or count it to the penny. Its just a general barometer of my financial situation that I prefer to see going up long term.

Jim

[Moneymonk]

Net worth doesn't matter, Cash flow is what keeps you intact

[MonkeyMonk]

I consistently track my net worth but only a once a year sometime in January. Even then I don't get too hung up on the shifts from one year to the next (e.g., I expect my net worth to go down or stay even this year due to the decline in the markets although I've probably had one of my best years ever otherwise). I'm much more interested in the longer-term flow.

I also project my net worth out to my estimated retirement date. Things are in great shape in that regard but we're thinking of having a 2nd kid which is going to take a big chunk out of that.

[MonkeyMonk]

I just realized that my user name could be construed as very confusing. :) Sorry Moneymonk.

[Pat]

I do track my net worth but only as a tool to make sure that I am on target for retirement. I only check it once a year. Usually after the tax season is over.

I am more concerned with how my income/outgo ratio is doing. As long as I can consistantly save and not have any cash flow problems, I'm good.

[LC]

I track mine twice a year. I figure that is more motivating than worrying about every little monthly change.

Are people's net worths really lower than last year? Mine is about 15% higher than last year even including the downturn in the market. Granted, I am young and the amount I save in a year is small compared to my total net worth, which causes big gains, but I am also invested 90% in stocks, which means I took a bigger hit.

[FMF]

LC --

When you're younger and your net worth is driven more by what you save/invest each year than anything else, then what the market does doesn't have as much of an impact. But when you have sizeable investments and/or don't save much each year, then what the market does can have a big impact.

For instance, someone with a net worth of $50k and $30k of that in investments, may be down 20% on those investments, but he's only lost $6k. If he has a new job that matches 401k contributions to any decent level, it's easy for him to make up that amount simply by saving more in a year.

But another person has a net worth of $1 million with $800k in investments. A 20% loss is a $160k reduction to net worth -- and amount that's difficult to make up in savings during a one-year period.

[ProsperityJunky]

Yes I agree with you it is the single most important financial measure.

I don't know how JD could care so much about his personal finances and not track his net worth. Yes it gets more complicated with businesses and real estate but if you don't value those at some level (even if its intentially undervalued) then you won't know if they are a good place to have your time and money invested. Each of the things he does keep score with (consumer debt, savings, mortgage debt, retirement savings) are a component of net worth anyhow.

I look at mine roughly once a month.

[Meg]

I track it monthly using NetWorthIQ.com.

[LC]

First, I meant to say the amount I save each year is large compared to my net worth…
I understand what you’re saying. A young person may have a net worth of $100,000 and saves $25,000/yr, so it goes up 25%. Even with everything invested in stocks, a downturn of 20% still ends up with a net gain. And you’re right – 401k matches increase this even more.
But in your example of the person with a net worth of $1 million with $800k in investments, this person is probably nearing retirement, so they should have only about 50% of this invested in stocks ($400k). So a 20% loss is “only” $80k. The bond section of their portfolio should have still risen by 3% or more ($12k). And unless they are already retired, they should still be saving something ($10k?) So their net worth should go down by less than $60,000. That is still a lot of money to lose, but still only about 6% of their net worth. I suppose for people in the middle (35-40), the losses might be more but it still seems like it shouldn’t be a major game changer. Unless people are too heavily invested in stocks for their age.

[FMF]

LC --

"But in your example of the person with a net worth of $1 million with $800k in investments, this person is probably nearing retirement."

1. Could be, but also couldn't be. I know several people in their 40's with net worths close to $1 million.

2. People have to have a higher % in stocks for a longer time these days since they're living longer. Gone are the days where you go straight to bonds at 55 or 60. Today, these people still have 20 to 30 years to live.

3. No matter what the situation, I was simply explaining how people could be down in net worth based on the market. Whether this is the actual case or not for the people above, it serves as an example of how it could happen (which was your question in the first place.)

[rwh]

I check my net worth every quarter. This time around that's probably what it will be:)

[Ben Dinsmore]

Try calculating your net worth based on what you HAVE control of. You can’t do anything to stop the Dow from going below 10,000 but you can control how much money you apply towards debts, and into savings accounts (all of which will improve your net worth). I call it “Non-Investment Net Worth” (NINW). The beauty of NINW is that it gives you a clear indication of the progress you are making in your financial life regardless of what the stock market is doing.

[kitty]

A couple of months ago, I roughly estimated it every time I updated my file - I do it whenever I have changes like a CD transferred to another bank or moved some investments around.

But now that I am bank in 6 digit territory, it is just too depressing... I haven't checked my 401K at all in recent weeks. Will probably do it when things stabilize a bit to see if I need to move things around. Before this happened I had about 60% in the stock market (combined 401K and non-retirement); now this number is likely to be less. I think all in all I probably lost mid-five digits, probably high five digits if I could primary residence.

I only count investable assets seriously, but occasionally I add my primary residence in my mind just so I could get the total to seven digits. Now that it is (probably) back in six digits I don't bother....

[SingleGuyMoney]

I have been tracking my net worth for the past couple of years using an Excel spreadsheet I've built. For last year or so, I've been checking things too much and it was starting to get depressing. I'm going to start tracking every 2-3 months.

[fathersez]

Yes, I do. But tally it up only once a year. This is the figure I use to gauge my progress. (I include our house too)

And I also use this metric to gauge the Islamic taxes that I pay.

Since it is an once a year affair, I do not look at it much.

[Matt]

I track net liquidity and cash flow. Net worth contains tracking elements that are all but completely irrelevant to anything that matters. (Home equity is a big component of most homeowners net worth. But home equity is merely the difference between what you could get for your house if you sold it and what you owe on it. What you owe always matters, but if you're not looking to sell, then fluctuations in the market value are irrelevant to you. In my case, I also own two private, closely-held businesses. There are a number of different methods of assessing a value for them, each method generating a completely different number, but as I'm not planning to sell them and nobody in particular seems interested in acquiring them, those pulled-from-an-accountant's-butt numbers don't mean anything to me. Whereas net liquidity on my house is the amount it'd cost to rent an equivalent house (since, with or without owning this place, we'd have to live _somewhere_), minus the amount my mortgage costs, and net liquidity on the businesses is my after-tax profit or loss.)

As long as we're always cash-flow positive and net liquidity is trending generally upward (although there will always be occasional dips), I know I'm moving in the right direction. And moreover, unlike net worth, I can _spend_ net liquidity.

Net worth will generally, barring extraordinary disruptions (such as the recent crash in residential real estate values), track net liquidity quite well. And when they diverge, it's usually because of something that shouldn't actually affect personal finances in a very meaningful way.

[Shayna]

I only recently starting tracking my network because I put most of my savings that was in CD's into Mutual Funds and wanted to see how I did. I track my expenses daily using mvelopes.com and then enter all my expenditures by category into a budget in Excel as well as my assets. So I figure my net worth once a month.

[Rob]

Track it once a month in a spreadsheet, mostly because I read that you did it, FMF. The main reason I do it right now is because it is negative (lots of student loans) and the day it turns positive will be glorious.

[Neil]

Yes, I've been tracking my net worth at my website for almost 2 years now and it helps keep me on track and my focus is on eliminating debt while accumulating wealth. It has helped me personally as a gauge and I would recommend it to anybody. I usually track my net worth near the beginning of the month and I use www.networthiq.com