What’s the equivalent tool in personal finance? Net worth tracking. When you want to lose weight, how do you track your progress? A scale. While budgeting is a real-time tool, it doesn’t tracker long-term progress. If you want to save more and spend less, you must make choices about spending in real-time using a budget. Eating well and exercising is like budgeting because these daily decisions lead to longer-term results. If you want to lose weight, you know you should eat well and exercise. I am going to compare budgeting and tracking net worth to losing weight. Net worth is a measure of financial progress, and it can help you stay motivated, particularly as you think about the long-term.

While calculating net worth is pretty easy, you may be wondering, should I track my net worth? The answer is a resounding yes. Liquid net worth is quite similar, except it excludes non-liquid assets like real estate from the calculation. While the above is the definition of total net worth, you may also hear the term liquid net worth.

Real Estate (property you own, REITs, etc.)Īdd up all your assets, then subtract all your liabilities to calculate your net worth.

Stocks & Bonds (including those in your IRA, 401(k), or taxable brokerage accounts).

Liquid Assets (Certificates of Deposit, Savings Bonds, etc.).

Cash Accounts (Checking + Savings Accounts).

Here’s a list of typical assets and liabilities to include in your net worth calculation. Assets like your car, even though they depreciate, should be included in your net worth. Now that you know what net worth is on a conceptual level, let’s talk real world.įirst, what should you include in a net worth calculation? While some may disagree with me, I believe you should include everything. Over time, your goal is to increase assets and decrease liabilities, making your net worth, the difference between the assets and liabilities, grow. When you add up all of your assets and subtract all of your liabilities, you’ll get your net worth. Mortgages, student loans, and credit card debt are all liabilities. Your house, stocks, bonds, and cash are all assets.

What are assets and liabilities?Īssets are things you own, while liabilities are things you owe. Net worth is a measure of assets minus liabilities. Best Net Worth Trackers: Summary What is Net Worth?īefore diving into some of the best net worth tracking apps, let’s cover the definition of net worth.

Best apps to track money