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TL:DR Consider checking and updating your net worth on a regular schedule. Online tools like Personal Capital (affiliate link) can be a great way to automate that process if you’re new to it, but if you’re interested in something you can tailor to your own situation, consider setting up your own. This post shows you how I put together mine.
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Calculate your net worth regularly
Hey, it’s almost the end of June—time to update your net worth!
(or create your first one, if you have never done so before).
I update our net worth usually twice a year—at the end of December/beginning of January, and at the end of June. (These are all approximate dates, but I’ve become more structured about this in the past few years).
I can and do “check in” on any time with my net worth on Personal Capital —an app I find useful in many ways.
However, there is a risk for some people of checking into it too much, and too concerned with the ups and downs of investments such as an IRA or 401(k).
If I had credit card debt or student loan debt that I were paying off aggressively, I would definitely check in to Personal Capital more often to see how that debt was paying down.
But since I’m kind of a numbers nerd, I really like to customize this based on the elements that I want to include or exclude, and a good old fashioned simple spreadsheet works for this best for me.
If you’ve never done this before, read up about how I do it. And then consider making this June your time to either use an online tool like Personal Capital or Mint, or to begin to create the best net worth calculator for your situation.
Tip: BEFORE you calculate your net worth, try to “guesstimate” it. This can be helpful, whether you are way off or close to the actual total. And going forward, if you do this regularly, you may become more and more accurate in your estimates.
Bad reasons to avoid finding out your net worth:
Here are bad reasons to avoid calculating your net worth:
ONE: You don’t know what to include or exclude.
A net worth, in its simplest form, is the total of your assets (what you own—from houses to cars to bank accounts & retirement accounts), minus your liabilities (mortgages, car loans, student loans, etc).
While you should definitely include all of your liabilities, it’s slightly trickier when it comes to your assets. I’ll go into that as I walk you through what I include and exclude.
The main point here? That old chestnut: “personal finance is more personal than finance.”
You get to decide. That makes your net worth specific to you, your situation, and your goals.
How I do it:
As with anything else, your net worth—what it looks like, but how you calculate it, what you do with the information, and more—is a function of your age, your financial situation, and your goals. So you will note that the things I include in or exclude from our net worth is
(When I say net worth, I mean of course our whole family, or at least my husband and me, but of course we take care of our kids).
At our stage of life (i.e., our ages), my husband & I use our net worth to see that we are on track for short-term goals like helping our kids pay for college, and long-term goals (really middle-range goals at this point, since it’s not so far away!) like retirement. Our net worth is snapshot of what kind of assets we have on hand.
It’s not down to the dollar or every single thing we own (such as our vehicles), but more a sense of what our money situation looks like now, and what that could mean in the future.
But if I were younger, I would have much different goals for understanding my net worth. For instance, if I still had student loan debt (which I did have in the past—many moons ago), I would definitely include that to see that change over time. I would likely include the value of my vehicle, and my basic checking and savings accounts, since these could account for a large chunk of my net worth at a younger age.
So before you calculate your net worth DIY, decide, based on your situation, what makes sense to include or exclude.
What I DO include:
*retirement plan with current employer
*rollover IRAs from prior employers
*Roth IRAs
*speciality savings accounts (for large purchase or savings ahead of time for travel, home repair & renovation, and other categories).
*part of the value of our house (see below).
What I do NOT include:
*the entire value of our house. We do still have a mortgage, so having the value of the house, relative to the mortgage, is helpful. But I “shave off” 15 percent of the Zillow value of the house, for several reasons: 1. Zillow is not always accurate, and I’d rather round “down.” 2. if we were to sell our house, there would likely be realtor fees, perhaps some updates needed. 3. we can’t really access the value of our house while we are living here (not that we want to).
*the value of our vehicles. We have paid-off vehicles so I don’t find adding the value of the vehicles, or having to figure out their “blue book” value, or other things, helpful. Plus, just like with our house fulfills the need of a place to live, our cars fulfill the need of reliable transportation.
*our basic checking and savings accounts. Our checking account in particular varies a lot depending on which bills have been paid or are yet to pay in any given month.
*college savings accounts (529 plans) for our children. I don’t consider these assets, since they are earmarked for our children’s college costs. If not used for that would have heavy taxes & penalties. I am grateful that we have money there, but it doesn’t really factor into what “we” are worth.
(If you’re interested, there are a number of personal finance bloggers who share and detail their actual net worth. I find these slice-of-life reports very interesting, and it has helped me to formulate over time how I calculate net worth and talk about this within our family. Here is a daunting (700-plus!) roundup of personal finance bloggers who share their net worths.
TWO: You don’t know how to do it.
A simple free tool like one of innumerable online net worth calculators can be of help, but they are often
For instance, I love and subscribe to a number of services of The Motley Fool. I started with the Motley Fool Stock Advisor, just FYI. However, the Fool’s net worth calculator is almost too detailed, and uses some almost archaic language (“charge account debt” I think means credit card debt, for instance)
Nerd Wallet has a relatively easy net worth calculator.
The problem with the online calculators is that normally you don’t have a way to save the information.
So you could use a tool like Mint or Personal Capital to connect your accounts (whatever accounts you want to include, that is), to be able to see in real time what things look like.
As I mentioned, while I do check in with Personal Capital, I also use a spreadsheet I created that I can personalize however I want to for our needs.
This spreadsheet is pretty simple, and I can update it with the amount our net worth has increased or decreased based on our accounts.
THREE: You are too young (or too old).
If you’re making money from a job, you’re old enough to calculate your net worth. And in some ways, starting extra young, when calculating your net worth is super simple, is a great way to start on the path of good finances.
For instance, if you start as a teen with a modest positive net worth (babysitting money, no debts), you may see your net worth dip (even into negative) when you take out student loans. However, that may keep you from taking out too many loans for school, when that may not be the best situation for you. Or it may be, if you will be in a high income career
Also, you’re never too old to calculate your net worth. You may not be in the position that you want, but the knowledge of where you stand is invaluable in turning it around.
FOUR: You know (or suspect) that you have a negative net worth.
This is probably the BEST time to calculate your net worth, because seeing the numbers can help you have a great impact on changing that situation.
Sometimes people celebrate when they “get back to zero.” So, for instance, if you start with a negative net worth of $30,000 due to loans and not many assets, you can see that number drop, and eventually go to zero, and then a positive net worth.
And that IS something to celebrate.
If you have a negative net worth, spending some time to tackle that and turn it positive can be a very motivating success.
Do you calculate your net worth on a regular basis? Do you use a tool like Personal Capital, your own spreadsheet, or something else?
