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How to Use Financial Tools to Track Your Net Worth

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How to Use Financial Tools to Track Your Net Worth

Tracking your net worth is a cornerstone of personal finance. It’s more than just knowing how much money you have; it’s a vital metric that reflects your financial health and progress towards your goals. While it might seem daunting at first, it’s a remarkably simple process when using the right tools. This guide will walk you through various options for tracking your net worth in 2021.

What is Net Worth?

Before we dive into the tools, let's define net worth. It’s a snapshot of your financial position, calculated as:

Assets – Liabilities = Net Worth

  • Assets: What you own – cash, savings, investments, real estate, vehicles, etc.
  • Liabilities: What you owe – loans, credit card debt, mortgages, etc.

Tools for Tracking Your Net Worth

Here’s a breakdown of tools you can use, categorized by complexity and functionality:

1. Spreadsheets (The DIY Approach)

  • Pros: Free, customizable, complete control.
  • Cons: Requires manual data entry, needs regular updates.
  • How to: Create a spreadsheet with columns for:
    • Asset Categories: (Cash, Savings, Investments - Stocks, Bonds, Real Estate, Cryptocurrency, Business Assets)
    • Liability Categories: (Mortgage, Student Loans, Credit Card Debt, Car Loans)
    • Value: Enter the current value of each asset and liability.
  • Resources: Google Sheets, Microsoft Excel, LibreOffice Calc.

2. Budgeting Apps (Simplified Tracking)

  • Pros: Convenient, automate some data tracking, often offer investment tracking features.
  • Cons: Might not have as much detail as dedicated net worth trackers.
  • Popular Options:
    • Mint: (Free) – Connects to bank accounts and credit cards, tracks spending, and estimates net worth.
    • YNAB (You Need A Budget): (Subscription-based) – Focuses on proactive budgeting, but also helps track net worth.
    • PocketGuard: (Free & Premium) - Tracks spending and provides a net worth snapshot.

3. Investment Platform Portfolios

  • Pros: Real-time updates on investment holdings, often include performance metrics.
  • Cons: Primarily focuses on investment-related assets.
  • How to: Most brokerage accounts (Fidelity, Charles Schwab, Robinhood, etc.) provide detailed portfolio views that automatically update your asset values.

4. Dedicated Net Worth Tracking Apps

  • Pros: Designed specifically for net worth tracking, often offer advanced features and reporting.
  • Cons: Some apps can be subscription-based.
  • Examples:
    • NetWorthTracker: (Free & Premium) – Intuitive interface, manual and automatic asset tracking.
    • WealthSpy: (Subscription-based) – Comprehensive tracking, reporting, and projection tools.

Tips for Consistent Tracking:

  • Regular Updates: Aim to update your net worth at least monthly. Quarterly is ideal.
  • Automation: Utilize automated features within apps to minimize manual data entry.
  • Consistency is Key: The more consistently you track, the more valuable your net worth data will be.
  • Don’t Be Discouraged: Net worth fluctuates. Focus on the overall trend over time.

Resources for Further Learning:

By implementing a consistent net worth tracking system using the tools mentioned above, you'll gain valuable insights into your financial health and be better equipped to achieve your financial goals. Good luck!