Business Tips – Using A Net Worth Calculator To Achieve Financial Freedom

Several years ago I met a great man named Jim Matush who became my friend and financial mentor, and one of the first things he told me to do was start tracking my personal net worth every three months. Being able to see how your assets and liabilities have fluctuated, where your money is allocated, and where your net worth is tracking is key to increasing your net worth when you are trying to achieve financial success, or even better…finical freedom.

This post will answer several questions about personal net worth, including:
– What is personal net worth?
– What is net worth important?
– Why should I track my net worth?
– How do I increase my net worth?
– How do I track my net worth? (With free Excel net worth calculator.)

Net Worth Tracking Line Graph

Here’s a simple line graph showing what your personal net worth could look like after you start tracking it. Seeing the visual up and up helps keep you motivated to keep it growing even more.

What Is Net Worth?
Your personal net worth is the total amount of your assets minus the total amount of your liabilities. It’s basically how much money you would have left over if you sold everything you owned, after paying off all the debts you owe.

Why Is Net Worth Important?
When Forbes Magazine puts together their annual list of America’s richest people, do you think they ask people “How much money do you make?” Absolutely not. Forbes is looking at net worth, and if you ever want to be wealthy, you need to start looking at net worth, too.

Let’s say there’s a man named Bill who doesn’t have a ” job,” and doesn’t receive a paycheck from a place that he goes to 40 hours a week…is he poor? Not necessarily. What if Bill has no credit card debt, has paid off his car, and the stocks and rental properties he owns are able to pay all of his monthly bills with money to spare…is he poor then? Not a chance. In fact, Bill is one of the few people in America that is “financially free.” The definition of being financially free is having your passive income exceed your monthly living expenses. This is the true American dream. So while Bill could never really answer the question, “How much money do you make?” he could certainly tell you how much his personal net worth is. And if this man happened to be Bill Gates, the richest man in America, his net worth would be somewhere around $54 billion.

Why Should I Track My Net Worth?
Just like everything in life, it’s much easier to achieve something great when you have a clear goal written out with a timeline for that goal in place. And to make things even easier, if you can see your progress on the way to that goal you can adjust your strategies to improve your odds of reaching the goal in the timeframe you originally planned. So in the case of personal net worth if you have a goal of how much you want your net worth to be by a certain year, and you track your net worth every three months, you’ll be able to constantly see your progress of reaching your financial goal.

If you use a net worth calculator like the one I have here for you to download, while tracking your progress, you will be able to see exactly where you money is and plan ahead accordingly.

How Do I Increase My Net Worth?
By definition, you increase your net worth by reducing your liabilities and adding to your assets. So, by paying off your car loan, student loans, and or credit cards, you have already increased your net worth. Additionally, if you save money each month and put it into a savings account, retirement account, or other investments such as stocks or real estate you will also increase your net worth.

How Do I Track My Net Worth? (Net Worth Calculator)
One of the easiest ways to track your net worth is by using a net worth calculator. Here I have a Microsoft Excel spreadsheet for you to downloadthat can easily be modified to suite your personal needs to help you track your own net worth. Below is a breakdown of each line in the net worth calculator. Once you have plugged in all of your personal numbers and information simply resave the document on your computer and keep up with it every three months. If you find this document useful, please pass it along to your friends, family, and coworkers and leave me some feedback in the comments of this post.

Net Worth Calculator

This is a screen shot of the personal net worth tracking calculator you can download here for free. The Microsoft Excel file has some information filled in the A column as an example of how it looks when it is filled out. Click to download the net worth calculator.

DOWNLOAD: Net Worth Tracking Calculator

(Excel File Breakdown)

1. Date
Track your net worth four times per year, which is quarterly. So you will track your financial progress on every January 1st, April 1st, July 1st, and October 1st. If you miss a date by a few days simply adjust the date at the top of the column so you know exactly when you tracked your net worth.

3. Assets
Your assets are the things that add value to your net worth. These items include cash, investments, property, and businesses. Items you own that depreciate in value (such as your car, furniture, electronic equipment, etc.) are not assets and should not be included in your net worth tracking calculations.

4. Cash and Bank Accounts
This is the section for your “liquid” assets, or cash. Liquid assets are readily available to use at any given time. They include your checking and savings accounts where cash is kept.

5. Primary Checking
This is where you’ll put the amount of cash you currently have in your primary checking account. Typically this is the account that you use to pay for your monthly bills, your groceries, your entertainment expenses, and so on.

6. Primary Savings
This is where you’ll put the amount of cash you currently have in your primary savings account. Different people will have different uses for this type of account. I use my primary savings account for unexpected car repairs, travel expenses, and upgrades to my lifestyle such as new furniture for my home.

7. Secondary Savings
If you have a second savings account this line is where you put the amount of cash you currently have in it. Again, everyone who has a second savings account has it earmarked for a different purpose. My secondary savings account is used to save for buying investment real estate in the form of rental properties.

8. Cash
If you keep any cash on hand in your home or in a place such as a safe deposit box, you’ll put the total amount of that cash on this line.

9. Other
If you have other checking or savings accounts, this is where you’d modify the A column of this line to include those accounts and the cash within them.

10. Total Cash And Bank Accounts
This line will automatically add up all of the cash and bank account amounts from lines five through nine to calculate total amount of your liquid assets.

12. Other Assets
Other assets can include your personal home, rental properties, commercial real estate, or businesses you own. These are “illiquid assets” that, while they can potentially be sold, they would take time to change from their current state into useable, liquid cash.

13. Personal Home
If you own a home, this is the line where you will put the current market value of your personal home.

14. Rental Property
If you own a rental property, you will put the current market value of that property in this line.

15 & 16. Other
If you own other rental properties, commercial real estate, or businesses, you can alter lines 15 and 16 to suite your needs.

17. Total Other Assets
This line will automatically add up your illiquid assets and calculate the total.

19. Investments
Investments are known as your “secondary liquid” assets, which are kind of a middle ground between your cash “liquid” assets and your “illiquid” assets. Secondary liquid assets are things like retirement accounts, CDs, stocks, bonds, or mutual funds that can be converted into liquid cash within a few days. Keep in mind that sometimes converting these assets into liquid cash will cost you money. For example, this would be the case if you took money out of a CD before the term ended and were forced to pay the bank a penalty fee. Also remember that because of the nature of the markets, these secondary liquid assets may fluctuate up and down.

20. 401(k)
If you have a 401(k) retirement account from your employer, you’ll want to find the current balance to put into this line.

21. Roth IRA
Just like the 401(k) line, use this line to fill in how much your IRA account has at the time of your quarterly net worth track.

22. CDs
If you have any money in bank CDs, put that amount on this line.

23. Stock, Bonds, & Mutual Funds
If you have any money invested stocks, bonds, or mutual funds, you’ll want to use this line to put in the current market value of those assets.

24. Total Investments
This line will automatically add up your secondary liquid assets and calculate the total.

26. Total Assets
This line will automatically add up all of your liquid, illiquid, and secondary liquid assets to calculate the total amount of all your assets.

28. Liabilities
When talking about your net worth, liabilities are things that take away value from your net worth. This could be money owed on home mortgages, credit cards, or other loans.

29. Credit Cards
Credit cards are one of the worst places to have numbers filled in on this chart.

30 & 31. Credit Cards
Although you should always strive to pay off your credit cards each month, if you do have any balances on your credit cards, this would be the place to put in those amounts.

32. Total Credit Cards
This line will automatically add up the balances of your credit cards and calculate the total of how much you owe.

34. Other Liabilities
The lines under the other liabilities heading are where you will put in balances on any outstanding loans you have.

35. Mortgage
You will put the balance on your personal home loan on this line. Provided you are paying your mortgage every month, this balance will steadily decrease over time, which will make your net worth steadily increase.

36 & 37. Other Loans
If you have other loans such as school loans, car loans, or other investment property loans, you will put the balances here.

38. Total Other Liabilities
This line will automatically add up your other liabilities and loans to calculate the total amount that you owe.

40. Total Liabilities
This line will automatically add up your credit card debt and other loans to give you the total amount of liabilities you have.

42. Total Net Worth
This spreadsheet and net worth calculator works towards giving you this final number…your current net worth.

44. Actual Change From Previous Quarter
Part of the fun of tracking your net worth is seeing how much you have managed to increase your net worth from the previous quarter. This line automatically calculates the amount of change in dollars you incurred from your last track.

45. Percentage Change From Previous Quarter
Another great way to track your net worth is by percentage points, so this final line automatically calculates the figures to show you what percentage your net worth has increased.

One thought on “Business Tips – Using A Net Worth Calculator To Achieve Financial Freedom

  1. Noah

    Mint.com is a great tool that I use to track my family’s net worth. The benefit of Mint.com is that it updates all accounts in realtime. It even hooks into all retirement accounts. I can instantly log in and within 30 sec tell you exactly how much the family is worth.

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