I’ve been keeping track of my net worth for about five years now. It’s been so useful and I just can’t imagine not doing it now. It’s helped inform many decisions around my finances.
Money isn’t everything. But, you need a baseline to ensure a certain amount of stability in life – a roof over your head, food, clothes etc. Without that, life is very stressful.
Ideally, you also have enough to enjoy life too. This is where a lot of people get into trouble and end up living above their means. I’m not talking about that. I’m talking about taking a trip, having a nice meal at a restaurant or being able to buy things that add value to your life.
And lastly, you want to be moving to a position where you are financially free and have a lot of freedom for how you spend your time. This is what we call retirement, but I hate that word. It assumes you work for most of your life and then you stop so you can take walks and do gardening. What it’s really about is being able to have the freedom to spend your time how you want – and if that’s continued to work because you love it – great. If it’s to stop and travel the world – great. And if it’s a mix of both – great!
Tracking your net worth shines a light on exactly where you are. You can’t hide from the numbers. It also makes it clear if you’re going backwards, treading water or moving forwards. That’s invaluable, because it helps to make better financial decisions.
When I first started tracking my net worth, I made it far too complicated and checked it too frequently. Over time, I’ve simplified it and made better decisions on how I classify certain things. I now update it on roughly a quarterly basis.
I won’t go into lots of detail here, but I’m always happy to have a chat about my approach with anyone.
I use a google sheets spreadsheet to track my net worth. It’s not fancy and fits on one tab.
I have the following sections that I track:
- Emergency fund
- General savings
- Vanguard – FTSE U.K. All Share Index Unit Trust – Accumulation
- Vanguard – U.S. Equity Index Fund – Accumulation
- Cryptocurrency – Coinbase
- Cryptocurrency – Binance
- House equity (approx.)
ASSETS (anything we have that is of significant value that can be liquidated)
OWED TO US (anything that’s owed to us)
- Hardly ever contains anything!
WE OWE (anything we owe)
- Credit card
It’s worth noting that I also break out the percentages of each investment, so I can understand my allocation at any one time. If you’re interested in the details of that, see here.
I also have a summary section that summarises the total amount and the percentage of cash, investments, property and assets.
CASH – 1%
INVESTMENTS – 32%
PROPERTY – 61%
ASSETS – 6%
OWED TO US
I’ve put in my real percentages to help show you how this type of visibility helps you make better decisions. Ideally I would like to see less of a weight on property, more weight on investments and a touch more in cash. So, right now we’re looking to build up a bit more in cash and we’re continuing to invest aggressively. That should help shift the weightings over time.
Every quarter I check the accounts and update the numbers to see where things are heading. The exception is property and assets, which I look at yearly. I only make an adjustment to these if I believe things have materially changed. Importantly, I try to be super conservative here, because I never want my net worth to appear higher than it is. I’d rather have a pleasant surprise, than be disappointed.
The only thing I haven’t mentioned is my pension. I track that also, but for some reason I don’t include it in my net worth. I seem to have a bit of a weird relationship with pensions because of the fact that money is locked away and then accessed later in life with some restrictions. That said, I should probably include it in the total net worth number. I’ll think about that.
If you don’t already track your net worth, I’d highly recommend sitting down and mapping it all out. It’s eye opening when you see it for the first time. I think you’ll find it an inflection point for taking more ownership of your finances and making some different decisions.
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