Even if you aren’t going to share the information with the world like I do, I believe it is important for most people to track their net worth. If I convince you with regards to the why, the how becomes less important.
Why Should You Track your Net Worth?
Discover Bad Trends
By reviewing your numbers every month you can discover trends, mistakes, etc. If you are watching your investable assets decrease despite the broad market increasing, you may have discovered that either your investments have high fees, your investments don’t line up with your risk tolerance, or you are being defrauded. In addition, if your liabilities include credit card debt, tracking your net worth will allow you to take a quick view to make sure those numbers are not increasing month over month.
You May Create Accountability
For me, I know I have made decisions based on knowing that I have to face the spreadsheet at the end of the month. Is that good? Who the hell knows, but I do know that it has forced me to make reasonable and responsible decisions rather than saying F’ it and buying a ridiculous material item. Although I am pretty sure I am getting this (or something like it) amazing dual tap kegerator for my birthday and Christmas.
Often the question will come up, “accountable to who”? Maybe it is just creating accountability to yourself or maybe, if you have a personal finance blog, it is sharing it with those few visitors who may (slightly) care.
Figuring out Where You Have Been Helps to Discover Where You are Headed
I know it may seem cliche (and completely obvious) but how the hell do you know if you are headed in the right direction if you don’t have a starting point? If you have never added up your assets and liabilities how could you possibly know you are doing the right thing to grow that number (assuming that is your goal – and I believe most people want to be wealthy). You could be thinking that you are doing everything right, but if that pure number isn’t going in the direction you want it to, maybe there is some room to make changes in your life/decisions.
Do you track your net worth?