Day #5 and Your Second January Money Diet Challenge

Save money by reading Happy Simple Living

Wow, I’ve been thoroughly enjoying all of the great meal and menu ideas you’ve shared from yesterday’s meal planning post. Thanks to all of you who have so generously taken time to tell us what you’re doing to save money and live large this month. Your comments inspire all of us!

As promised, it’s time for Challenge #2. Are you ready?

Let’s Dig Deep

In my humble opinion, the best and most honest way to measure where we really stand financially is by figuring our net worth.

Our family’s finances didn’t really start moving in the right direction until I began doing this calculation each month.

Before then, I could fool myself too easily. I could feel virtuous about putting $100 in our savings account, for instance, and conveniently overlook the fact that I also charged $100 on a credit card that month on impulse buys at Target.

Net worth, as I’m sure you know, is the difference between what we own and what we owe. On the first day of every month, I calculate ours. Now that it’s moving in the right direction, it’s an exercise I actually look forward to. My goal is to improve our net worth each and every month, even if it’s just a little bit.

If you do the same, you’ll discover that your finances can improve dramatically over time. Just focus consistently on moving that bottom line up, up, up.

How To Figure Your Net Worth

Figure your net worth | January Money Diet

To do this calculation you can simply jot the figures on a piece of paper and use a calculator, or you can create a simple spreadsheet with a program like Excel (Money Under 30 has one posted here).

Start by adding up your assets. If you’re a homeowner, list the current value of your home. If you’re not sure, a site like Zillow can give you a rough estimate for now. Your professional neighborhood realtor would probably be happy to give you an estimated market value, too.

Go out to your car and write down the mileage and condition, enter the info at Kelley Blue Book, and figure out the private party value. Check the current balances for your bank accounts, retirement funds, investments, etc., and add those to the list.

Don’t forget things like your grandpa’s coin collection, or any valuable jewelry, antiques, artwork, etc. you own. Just be realistic about the cash that the sale of such items would generate, which is sometimes considerably less than the appraised value. Add everything up, and you’ll have a pretty good idea of your total Assets.

Next, make a list of every single one of your debts: mortgage balance, car loan, credit cards, lines of credit, student loans, etc. Add these up, and you’ll have your total debts, or Liabilities.

Now, simply subtract the Liabilities from the Assets to figure your Net Worth.

The result will be different for each of us. If yours is a negative number, don’t despair! When I was 21, I had zero assets, $5000 in credit card debt, a new car I couldn’t afford and an upside-down car loan with a 21% interest rate! No matter what your financial situation is today, you can acknowledge that this is your starting place and resolve to get your net worth moving in a positive direction in the days ahead.

By figuring our net worth every month, we can see the effects of our financial decisions in a very real and immediate way.

If I charge a $25 sweater on my Visa card, our net worth goes down $25. If I instead contribute $25 to my IRA, our net worth goes up $25. So simple!

Will You Do Challenge #2?

How to Get Rich Without Winning the LotteryFigure out your net worth, and leave a comment below when you’ve finished the task. (You don’t need need to share your net worth, just the fact that you figured it out.) If you did this exercise last year and your number has improved, we’d love to know.

My friend and personal finance guru Barbara Friedberg has generously donated a copy of her wonderful book How to Get Rich Without Winning the Lottery to give away to one of you who completes Challenge #2 this month. Barbara has a knack for explaining money matters in a simple, straightforward way, and I know you will enjoy her book about building and managing wealth as much as I have. Complete Challenge #2 and leave a comment on this page, and you’ll be automatically entered for the random drawing of Barbara’s book.

I encourage you to calculate your net worth each month during 2016, and challenge yourself to increase your bottom line every month. Are you already in the habit of regularly tracking your net worth? Perhaps you’d like to set a Net Worth Goal for the end of 2016.

Finally, my friends, no matter what the spreadsheet says – YOU are worth more than the finest gold or silver.

Here’s to a successful January Money Diet, and a financially strong 2016.

Hugs,

The signature for Eliza Cross

P.S. Tomorrow on Twitter from 1:00 to 2:00 p.m. ET I’ll be live tweeting about the January Money Diet for @Experian_US’s weekly #CreditChat. Join me there for more money-saving tips!

About Eliza Cross

Eliza Cross is a full-time writer and the author of a dozen books about food and home design. She has been blogging about simplicity and sustainable living since 2006.

32 comments to Day #5 and Your Second January Money Diet Challenge

  • Virginia

    My husband and I do a state of the household review every January where we review last years budget compared to actual expenses and expenditures and set a new yearly budget. Finally accomplished that for 2015 this week! Quick books helps us track out net worth as we do monthly updates throughout the year. It’s a handy way to track your progress, and has really helped us plan ahead for irregular expenses like college tuition payments, summer camp fees, etc.

  • Amy

    This was pretty easy for my hubby and I because we already have it set on mint.com and he is a CPA and lives for numbers. We did try to write down everything we spent this month (easier to use credit cards and let mint figure it out) (we pay off our credit cards every Monday so always keep our spending in check and very little surprises)

  • Helen Shaw

    This was an interesting exercise and a bit of a wake up call, day to day ‘necessities’ make such an impact and planning to cut right back on the impulse purchases. We’re not in a poor position but things could be better.

  • Tina

    Hi Eliza
    Great tips! Rich Dad Poor Dad was a good read back in the early 2000’s. I think it’s still worth a browse as R. Kiyosaki talks a lot about money attitude. For me, not using a credit card has been essential in avoiding unplanned/unnecessary spending. I use a debit card now. Credit card is kept locked away and only brought along when travelling ‘just in case’ but so far haven’t needed to use it.
    I have a $1000 fund squirrelled away. Using my debit card helps me track spending without incurring charges and cos I am not consistent in writing everything down. I noticed that every month I will have at least one impulse or unplanned purchase which I didn’t actually need. So now I am more vigilant. Being an emotional spender I now avoid malls as they are spending traps, designed to keep you inside longer so you spend more. Through decluttering I realised a lot of my passive spending is on toiletries. At one point I had 4 different bottles each of shampoo and conditioner, each more costly than the previous one. Also bottle after bottle of creams, lotions, etc. Now I have a much simpler regimen which costs a lot less. Being mindful about $$ lets you observe and notice bad habits. My daughters have also realised that buying affordable chain store clothing actually costs more than purchasing something of a higher quality, since the volume of the cheaper stuff ends up being unused. They noticed that most of their give away pile was of this type. Buying one really great sweater which you love and use often costs less than 5 cheaper ones that you don’t love. Enjoying your emails very much. Thank you

  • Joy

    several years ago my husband and I became frustrated with our Christmas spending and paying off credit card bills for several months and decided to put a $20 bill in an envelope each Friday when we gave ourselves our weekly “allowance”. By Christmas we had nearly $2,000 and I thought I am NOT spending that much money on presents! But I already had been spending that much and more! By using cash and cash ONLY we were more thoughtful and intentional about our gifts and spending. Each January a new envelope is started and the leftover money from the previous year goes into a mad money envelope and has funded a new television, some reupholstery to an old chair, and looks like there will be a new couch soon and NOTHING on credit.

  • Lyn

    Thanks for the challenge. My husband and I have been tracking our NW for years, but have a hard time making the connection between small purchases and the big picture. That is where our annual cash flow analysis and budgeting comes in. In the last two years, for example, we had two especially big trips (a friend’s wedding in Europe and a business trip in Italy) that blew our budgets. This year we plan to stay home and use that money to pay off some of our home equity. What is new for us in the past few years, however, is calculating our Net Energy Consumption each year. There is a direct correlation between the money we spend and our impact on the environment. Love paying attention to both.

  • Cindy

    I always have some idea of this in my head but have never written it on paper before. Going to try to do this quarterly to keep on track

  • Kelly

    I first started doing this quarterly about 25 years ago. I cut down to six-monthly and that is good too. It really helps with financial accountability. It is more helpful to also look at the income over the same period. Six months of income compared to the movement in net worth over that time. It’s a real eye-opener!! Then we also think about the result of the money that vanished – greater fitness from gym fees (yay) vs a pile of clutter from a half-financed hobby/project that we didn’t commit to (boo), for example.

  • Marissa

    My net worth is not a financial one as such but recognition of what i have that is far more valuable – my family, roof over my head, my health, a steady job, a car and 2 cats. I really cant put a price on that. I do however have goals which i aim to achieve this year onwards ( to get back to basics and live a simple snd happy life, reduce waste and recognise how much i already have, and let the money pay off my mortgage, and be debt free).

  • Vesta

    I figured mine this morning – could be better, could be worse

  • Colette

    I have never figured out my net worth, although I’ve guesstimated it. I can see the value in doing this exercise as it keeps fresh in one’s mind the debts that need to be whittled down, while encouraging one with their accomplishments.

  • Elizabeth

    I’m really scared to do this. I am in grad school, and still racking up loans. I know things will look very, very ugly. 🙁

  • Chrissy

    I actually signed up at mint.com and have everything entered there, I can check it whenever I want, set up budgets and so many other things. I love it!

  • Petra

    Will sit down now and look at our money situation. Our son will go to college in 3 years and I’m stressed out about the money we have to spend. I hope we can save some extra money this year.

  • I started using Mint on my phone last year for this challenge, and being able to see in real time where our accounts were definitely has decreased my impulse spending (and encouraged me to be more generous.)

  • This is one thing I won’t be doing… I know we’re not financially “worth a lot” but we have no debt, we work hard for what we have, and we give to others in need. For where we are in life, I don’t really care about net worth, not to be trite, but I don’t lose any sleep over it. 🙂

  • Lynette

    I also thought calculating net worth would be an annual event, I can see how doing it each month would increase the motivation factor substantially. I am not where I would like to be financially but hope to turn things around this year.

  • Mary Ann

    I figured my net worth and then double-checked numbers on my pension plan. I am one of the lucky few who still has one. I realized that although I have the choice to retire in four years, I might want to wait a little. I am so grateful that as as result of seven years of financial tracking and practice being frugal, I DO have choices. I know how to live very “lean” like this month and I also know how to enjoy luxuries in one category by making cuts elsewhere. For today, I am in the driver seat yet still I am prepared to weather unforeseen setbacks. Super grateful.

  • Annette

    This is the first time I have calculated my net worth and I was pleasantly surprised! I am in a better place financially than I thought – it’s not ideal but better than I expected. I have never before thought about small purchases affecting my net worth so I no longer carry a credit card in my wallet to avoid temptation. Thanks you for making this a challenge.

  • Kimberly

    Haven’t spent a dime on ANYTHING so far!!! Got the hubby on board and he hasn’t spent any money either. We will soon have to put gas in our vehicles – I can go a month on one and half tanks – he uses his company vehicle and can go a whole month on one tank. We are eating from the pantry and freezer for the entire month of January – no exceptions! I am so excited to have this become a yearly ritual!! Thank you

  • Sara

    I do this every month since last years January money diet. Im doing well, paid off 5000 dollars of My stundent loan last year. The only month when my net Worth didnt increase was vacation month.

  • Lisa

    We do this annually, and monthly we have a very good idea of our debt (which is only one loan) and account balances, but haven’t actually followed the total net worth. I am eager to do this! The other thing I never think about is how a purchase affects our net worth. I guess we have savings goals, and I put any extras in savings, but don’t think of my purchases against extra savings.

  • Heather

    I really like the idea of tracking our net worth, makes me look at the big picture. I have set up the excel sheet and I plan to track our net worth every month. Thanks!

  • Lynn Louise

    We have started looking at our finances much closer due to some plans and changes that we have coming up this year. Exciting! Looking at our net worth for where we are at right now. It will probably change by next year but I am going to keep doing this monthly to keep a close eye on it. Paid off my car last summer and looking at taking on a second job to bring in more income. Hoping to find a work from home job that is legit. Haven’t used the credit card this month so far so feeling good about this diet!

  • Kim

    I like the idea of doing this monthly as it helps to curb debt and keeps motivation. Save for purchases instead of buying on credit.

  • I tend to do this annually as I don’t have access to my husband’s super fund to get accurate figures except when their end of financial year report is posted out.

    I do however keep track of changes in the mortgage (our main debt) and our other account balances monthly.

  • Jessica

    While typically an annual exercise, I love the idea of doing this monthly and really comparing the progress. Done for January and will definitely continue each month throughout the year.

    5 days into the January money diet and I am very excited about the changes we are making! Thanks for doing this.

  • Anja

    I have started this in November 2013 and on the first of each month I sit down and do my figures. It’s amazing to see how those figures change over time. It helps me keep track of both savings and debts. It keep me motivated to get the debt numbers down quicker. For example when I started my car loan was double then what it is now and my net-worth has increased by nearly € 8.000.

  • Katy Emanuel

    I haven’t been tracking it monthly, but keep a close eye on our debts and we like to ensure we are seeing them shrink each month. Especially since being let go from my job in February we are much more aware of our net worth. Just checked it again as this was a good reminder and we are definitely moving in the right direction.

  • Libby

    January 2015 I started tracking our net worth monthly on an Excel spreadsheet. My inspiration is the $1 Million Challenge on Budget Loving Military Wife.

    It is interesting to look back and see how the balances on certain specific accounts such as my mortgage, emergency savings account, and retirement funds have changed over time. It’s very clear that one of the retirement mutual funds is not doing well and I need to start researching other options. Without this monthly tracking, I’m sure I wouldn’t have caught this.

    I’m super curious to do this again for 2016 and see if any monthly trends occur – like are certain months always spendy? Extra income months, etc.

  • Kimberly

    I don’t have much. House not worth a lot( neighborhood is so different and no one can sell a house here for much at all) car is older but I do know the debt I have and watch it monthly going down. I don’t twitter and wish you could do it on face book also but that is life. Doing very well on challenge and haven’t bought anything this month yet. Using food I canned this past summer and making it do.

  • Kathy

    What a great tip. We always do a net worth at the end of the year as I am getting all the tax information together and cleaning out my files to start a new year fresh. It never occurred to me to take this step at the start of each month. I will definitely be doing this step from now on.

Leave a Reply

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>