How I Track My Net Worth, What I Look In It

Since I blog about personal finance, naturally you would be interested in my financial progress. In this post I’ll mention about this progress and the growth rate of my net-worth value over the last 12 months. I never talk about my income publicly and probably will never do it, so I am not revealing the absolute number.

I will only be limited to the growth of my net worth in percentage term. Let me clarify first that I am not wealthy by any means,  am rather, a common man. As I said often, I am not a financial expert; I am just a ‘guy next door’.

I blog and give friendly advises because that helps in my education and blogging let me manage my own finances better. This blog is my way of learning personal finance effectively with a hope that you learn a thing or two in the process as well.

Probably this is first time I am going to reveal a few things on my own finance.

Net-Worth  to me, is a number which indicates my financial health, a sort of “financial scorecard”. I track all my financial accounts in one place, Yodlee Money Center.

Although net worth is useful, I don’t spend a lot time worrying about this. When you start getting into tangible “assets” like a house, car, etc., it becomes very hard to put a value on them. We can’t objectively measure their value.

The values of the tangible assets are just opinions. Your house is always worth more to you than what others think it might be worth. You may be able to sell your car for more than the Kelly Blue Book value.

In general, I tend to not include full value of my cars as assets. They’re really not, they’re expenses. Assets put money in our accounts, and last time I checked, my cars were taking money out of my pocket.

I have two cars, a 2002 Hyundai Elantra and a recently purchased 2011 Toyota Camry. The Toyota came with 0% Toyota financing (You need to have an excellent credit score to get such an offer).

I calculated the amount I paid off on my Toyota so far in net-worth calculation. I also deducted $3000 from it towards depreciation. For the old Hyundai, I didn’t include it in my net worth. Although it can bring in a couple of grands when sold.

I do track the progress or growth rate of my net worth periodically for the below “not too compelling” reasons.

1. The best benefit I get, and you might disagree, is the boost in confidence and a good night sleep seeing it growing.
2. It helps when I am trying to convince myself not to spend on a big ticket item and wait for our home to be paid off.
3. This is the only method I found to assess our rate of financial progress.

As i said earlier, the absolute net worth number doesn’t make much of a value. I get to see it as I track all my accounts on Yodlee Money Center and net worth is just another feature in it. I admit, I look at it every time I am on Yodlee.

One of my New Year’s tasks was to gauge my financial progress in 2011. I took the difference of absolute net worth values between December 31, 2011 and December 31, 2010.

Net worth progress in 2011

I think, I did a meticulous job of erasing ‘Y-axis’ values, in best effort to hide my net worth. My net worth increased by 20.40% in last year.

I am satisfied with my progress. Before you start thinking this is a huge increase, let me tell you that, I am not already on a strong and high net worth base. In absolute term, the increase is normal and not extra ordinary.

Effectively I started earning in this country from year 2005, my first job wasn’t a big paying job. Three jobs and 6 years later I am in a job with satisfactory wages (read how to get a raise).

February – The big jump you are seeing between Jan 2010 and Feb 2010 is due to the huge bonus payout which is a significant part of my yearly wage. (another bonus is just round the corner :) )

March – The drop in net worth value during March was due to the visit to my home country. We visited India and spent generously on our extended family. We received a ton of goodies in return as well. Some of my air miles were used to pay for the extra luggage. We take this trip every other year and it’s a big expense.

July to October– The drop in net worth during middle of the year was due to the car purchase. I paid for almost 50% of the car cost upfront and rest is in 0% loan, as mentioned earlier. I finally added the manually calculated value of our car in October, hence there’s a slight jump in October.

Liabilities – One aspect I think I did well with throughout the year was to keep my liabilities in check. We generally pay all our purchases with credit cards, and pay off all the cards fully before payment due date. You can see the size of the red bar staying constant throughout the year. That means we didn’t carry any credit card balance. Let  this be your inspiration to keep your credit card debt in check.

Since I didn’t include full value of our car in total asset, I didn’t consider the outstanding car loan in my liabilities.

More than 50% of my assets are in stocks or stock funds. Even a slight up or down stock index movement creates a difference of few thousand dollars in my net worth. That’s one of the reasons I don’t value the absolute number much.

With the expectation of another good bonus and some possible windfall from somewhere ( my blog perhaps?), it will be interesting to track the growth this year.

A few tips to accurately capture net worth

As a financial literate, you should track your worth and it’s progress over time. Don’t go overboard though. When I started tracking, I used to check it every day. That was foolish.

  • When you track your net worth, make sure you factor all your accounts in, including your retirement accounts.
  • Add numbers for the estimated value of your tangible assets.
  • Use available tools like Yodlee, Mint, Quicken etc. Your bank website might have their own tool as well. I know Bank of America does.
  • Include all your liabilities, mortgage, home equity loan, credit card debt, unpaid car loan (if you are including full resell value of your car)

As I mentioned above, net worth calculation technique is a highly subjective matter  and how you calculate this, depends on personal opinions and preferences.

If you do not agree with my way of calculating some tangible stuff like car, that is absolutely fine. I find financial experts and bloggers differ among themselves on this aspect. Whatever you do, the bottom line is, tracking the progress rate is much more important than the tracking the absolute number.

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  1. Dannielle @ Odd Cents says

    I must try this exercise. I’ve always wanted to calculate my net worth. Cars depreciate so quickly, it almost makes you wonder if you’re throwing your money away. In Barbados, property is always a safe bet because it always appreciates.

    • says

      Beware of the law of averages. Nothing can go up forever, it comes down occasionally. If you are in Barbados then I guess Yodlee is the tool to consider as I don’t think mint has many foreign financial institutes on their list.

  2. says

    20.4% is awesome SB! I agree, don’t obsess over your net worth, but do it once a while to see where you stand. You should be going forward, not backwards!

    • says

      Perhaps you need to do a little bit more about once every quarter? I am sure you re check your goal accomplishments more frequently, right? This is no different. Remember this is only parameter that can tell you your current financial muscle power.

  3. says

    Congratulation man. 20% is awesome, no matter how you did it. :)
    I include primary residence and our car in the net worth, but it’s not a big piece of the pie so no big deal. The house is barely worth anything with the drop.

    • says

      Thanks Joe. OK, I admit 20% is good. I generally try to save 50% of my income. Now since my wife is looking for job, net worth is expected to increase further and my first home with 100% down payment seems a nearer dream. You have your home ncluded in net worth and you say it’s barely anything!

    • says

      Thanks for the encouragement. all these 6 years I am on single income. My wife got her eligibility to work very recently. We expect to save at a faster rate now. 10 years from now, at a 25% (factoring in a part of second income) year on year growth, the calculator shows more than a million dollar. I hope the income streams remain consistent though.

    • says

      I mainly used Yodlee, cause mint or quicken don’t have the overseas accounts. I can’t link to my fund accounts in India. Yodlee, as I always say is created for big corporations. AMEX, BankOfAmerica and many more use Yodlee service. Mint is retail focused and tailored for average american consumers.

  4. says

    I’ve been tracking my net worth for years now, and it can be very motivating. (Especially if I go back and look at where I started, which was negative.)

  5. says

    20% is huge! I don’t calculate our NW on a monthly basis but I when I looked at it last time, my major focus was on liabilities. I did not include our cars, and did not include our house. Loved how thoroughly you explained your calculations.

  6. says

    Yep a 20% boost is huge! Since I track everything in a spreadsheet, knowing my networth is pretty straightforward.

    Here’s what I currently include:

    * Cash
    * Equity and bond investments
    * Precious metals
    * Value of home
    * All liabilities

    Here’s what I don’t currently include:

    * Value of any furniture or stuff like that.
    * Value of websites.

  7. says

    I began tracking my net worth in college every month and have done so since 2003. I look forward to the end of the month so I can calculate it (crazy, I know!!). I can look at the graph and know exactly what the large positive and negative swings are from. I find doing this motivates me to save more (try to increase my net worth every month) and I learn from it too.

    I include my car in my calculation and can see how big of a “hit” my net worth took. That “hit” carries out for 3-5 years depending on how long you have to make payments on the loan, and then some because that money could have been working for you during that time.

    • says

      On the first part, yes, I agree seeing your worth grow is a big motivation. If that works for you and encourage you to grow it faster, nothing wrong in it. Continue doing that.

      On the second part, a loan is always bad for your working money. You pay interest and then you lose interest you would have earned with the payment you already made. It really hurts. But, we all need loan to get things that we otherwise can’t afford. A home, a car an education are all examples of that. I consider them as good loans.
      A debt on credit card is absolutely bad loan. We should avoid that at any cost.

  8. says

    Yep, calculating your net worth is always a great motivator. Personally, I’ve always preferred to calculate things that are relatively liquid, and not included in discretionary spending. That means that my car, and that vacuum cleaner I just bought are not included. Not only is it a bit of a hassle calculating the value of all my used items I have laying around, but does not give much of an incentive to stop spending if everything I buy is calculated in my net worth anyway, and is also impractical if it’s something no one would actually buy off me.

  9. says

    Reading this and many of the comments that followed proved to be a refreshing eye opener for me. I haven’t taken the initiative to track my net worth at all over the years and am now realizing that I should definitely make this a common practice because as you said, it can really give you a better nights sleep knowing where you stand and what your growth rates are looking like. Also, I haven’t gotten involved in utilizing any sort of technology, or websites, or apps, to track my expenses and worth but seeing you mention that you use Yodlee Money Center, brought me to recognize that I should probably get hip to the times and start using more technical methods than pen, paper, and the occasional calculator.

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