Why You Should Be Calculating Your Net Worth — Today

Photo by Andrew Neel on Unsplash

What Is It?

Why Do This?

The Full Picture

Slow Going

30,000 ft View

How Do I Do It?

  • Real Estate (your home, a rental property if you have one)
  • Vehicles (car, motorbike, boat, caravan)
  • Retirement Accounts
  • Non-Retirement Investment Accounts
  • Savings Accounts
  • Any other bank accounts you have (e.g. checking account)
  • Other Items of Significant Value (e.g. art, antiques)
  • Mortgage
  • Car Loans
  • Student Loans
  • Medical Debt
  • Credit Card Debt
  • Other Loans/Debts, such as Personal Loans

Tips and Tricks

  • Only do this calculation every 6–12 months. You might be tempted to run it more regularly, but that’s not always helpful. Your financial progress isn’t a straight line — there are ups and downs, and what we want to look at is the trend over time, not the day to day shifts. If you’re aggressively clearing down debt, I’d suggest every 6 months, but otherwise every 12 months if sufficient.
  • It’s best to do the calculation at the same ‘time’ within the month — either right before, or right after, pay day. This way you’re able to compare like for like and can minimize small skews that you’d otherwise have.
  • Be selective in what you include as an asset. You may be tempted to include more things which have value, but which aren’t really considered assets. This would include things like furniture (except antiques), appliances and electrical items, and most jewellery. While these are technically assets, they’re quite small and difficult to determine a fair value for. Going to this level of detail isn’t necessary and would not be recommended.
  • When noting the value of non-monetary assets (like property or vehicles), it’s important to remember that the value of an item is what someone would be willing to pay for it, not what you’d be willing to sell it for. Many assets have strong sentimental value and it can be hard to accept that the financial value of an item is different to the value you hold for it. But it’s important to try and remain impartial on these things so that your numbers are accurate and helpful. Where possible, I’d suggest using online services to try and determine a fair market price for these items.
  • As you add your liabilities, take the opportunity to also note other details about the debt, including the current interest rate, the length of the loan, and any special deals that may be in place. This can be really helpful if you want to look at debt consolidation, or if you want to consider the avalanche or snowball technique to clearing your debt.
  • You don’t need to include any bills or financial commitments in your ‘liabilities’, such as your rent, the cell phone you’re paying off, or your property taxes (if you’re not behind). While this is money you need to pay, it’s not towards a debt but rather payment for a service and is therefore considered a living expense.

Final Note

--

--

--

Money, productivity and career. Visit thejacobshaw.com

Love podcasts or audiobooks? Learn on the go with our new app.

Recommended from Medium

Will insurance cover the car?

Defaulted first payment on credit card what are my options?

Hacking Your Income Taxes

Ultra-profitable and secret strategy to make money on the internet with youtube in 2022

Building good Financial habits: Budgeting

Can you convert currency enough times to make money?!?

Top 10 Chart Patterns Every Trader Should Know

Take Control of Your Finances - Change Your Life

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Jacob Shaw

Jacob Shaw

Money, productivity and career. Visit thejacobshaw.com

More from Medium

Running For Returns — Real Estate Deal Sourcing

An important message for the younger generation

Budget Zen with 1 Rule

Holiday Budgeting: 5 Ways to Conquer the Art of Holiday Spending