Personal Finance: Tracking Your Net Worth

Ever Wanted to Run Your Own Company? Practice Being a CFO with Your Own Personal Finance Balance Sheet

It’s been said that the first step to improvement is measurement.  This is certainly true of personal finances.  Measuring net worth is the first step to increasing net worth. 

My husband and I started tracking our net worth nearly five years ago.  This simple spreadsheet exercise has aided us immensely in achieving our personal finance goals these past few years.  By thinking about personal finance the same way a company builds its balance sheet, it is easy to see the big picture and achieve long-term finance goals.

Just like a company balance sheet, “net worth” is calculated as “assets” minus “liabilities”.  Our spreadsheet is constructed with a list of assets and debts in the first column and monthly dates across the top.  Every month or two, I enter the value of each account in the corresponding column.  Since my husband and I are rather geeky accountant types we also list subtotals for each of the following sections:

Assets
We start our spreadsheet by listing our assets.  We start with “liquid” assets.  These are assets that can be easily converted to cash.  Our liquid assets include: checking and savings accounts, money market accounts, mutual funds, and individual stocks.  Liquid assets could also include bond funds, bonds, Treasury bills, and savings bonds, to name just a few.

Next on the spreadsheet we list our “retirement” assets.  These include our 401K and IRA accounts.  We’ve been slow to roll over old employer 401K accounts, so we’ve accumulated quite a collection of accounts in this section.  Eventually, we’ll do the right thing and consolidate these, but in the meantime our monthly net worth exercise has forced us to keep track of the locations and amounts in these accounts.