For the past three years I've diligently kept a log of my net worth that gets updated every week. I can remember one week before I had started this habit, logging in to check my transaction account, and finding it overdrawn. I had let my expenses get out of hand and was effectively burying my head in the sand.
I decided things needed to change and begun a written log of my net worth. A weekly snapshot of my finances.
Soon I started to discover where my money was going and that I wasn't really moving anywhere. Although I had plenty of money, I wasn't getting ahead and this lead me to change my spending habits and look to increase my income.
Why you need to track your net worth
If there is just one financial metric you should be tracking, it should be be your net worth. It will show you every asset you own and all the debts you currently have. When you track your net worth over time, you'll see if you're getting ahead or whether you are spending as much as you make each month.
I don't like using a budget, as I believe it's too constraining. But I still like to track my net worth, and this influences many of my spending decisions each month. If I haven't seen any growth in the past month, I'll be unlikely to make any big spends if possible in the current month.
Why I keep track of my net worth on a weekly basis
I keep a spreadsheet that is updated on a weekly basis. For many people this would be overkill. But for me I like to see if there has been any growth or loss on a weekly basis. I can see from a week to week basis if there has been too much spending.
As your net worth grows, you won't need to keep track on a weekly basis. As any addition or loss over a week, would barely influence your overall net worth. For example you might spend $1k in a week. This in a net worth of say $3 million is going to be barely noticeable.
Weekly updates work for me as I'm still quite young with a small overall net worth.
How to keep track of your net worth
I like to use a spreadsheet as it's really simple. I have about half a dozen accounts and keeping tally of these in a spreadsheet is easy.
I set a reminder in my calendar to make sure that I actually update my spreadsheet, otherwise I forget.
If you're time poor and don't wish to spend as much time updating a spreadsheet, or if you're just really forgetful, then it might be better to use an automated tool.
A number of my personal finance friends/geeks, swear by Personal Capital. If you have a lot of investments than this is the tool for you. If you own a bunch of stocks than tallying them all up monthly can be very time consuming. Personal Capital will keep track of all of this for you automatically and comes with some nice tools for future planning too. If you have real estate (something which I don't have yet), personal capital will connect with Zillow and automatically give you a valuation.
Time to get your head out of the sand
My life changed when I started taking control of my finances and really looked at my net worth growth. I now have something to work towards and can keep track of my progress week by week. If you haven't yet started tracking your net worth, its time to take your head out the sand and start being honest with yourself.
How do you track your net worth? Let me know in the comments.