January Money Diet Day 3 – Time To Calculate Your Net Worth

Figure your net worth at Happy Simple Living blog

My friends, I used to lie to myself.

I didn’t intentionally try to deceive myself, of course, but I didn’t really have a true picture of my financial decisions. I could feel virtuous putting $100 in savings, while meanwhile I had charged $125 on my Visa and my car’s value had dropped $200 that month.

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 now calculate our net worth. Our finances didn’t start moving in the right direction until I started doing this exercise and challenging myself to increase the bottom line each month. Now that it’s moving in the right direction, I really look forward to creating the monthly spreadsheet.

If you do the same, I believe you’ll discover that your finances will improve dramatically over time. Just focus consistently on moving that bottom line up, up, up. As you build wealth and reduce debt, you’ll enjoy greater security and sleep better at night.

Calculator image

Photo: Horia Varlan

How to Figure Your Net Worth – Assets First

You can easily make this calculation with a pencil, a piece of paper and a calculator, or you can create a simple spreadsheet using a program like Excel.

Start by listing your assets. If you’re a homeowner, figure out the approximate 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.

Check 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, mutual funds, stocks and bonds, etc., and add those to the list.

You can also list 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.

List Your Liabilities

Next, make a list of every single one of your debts: mortgage balance, car loan, credit cards, lines of credit, home equity loans, 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, and a new car I never should have bought with an upside-down loan and 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 the right direction. We’ll talk about specific ways to do this in the days ahead, okay?

A Two-Part Challenge

Part 1 – Figure out your net worth.

Part 2 – Set a goal for yourself of what you want your net worth to be at the end of 2015. This can be a fixed dollar amount or a percentage.

If you’re so inclined, leave a comment below when you’ve finished the exercise. You don’t have to share specifics unless you want to.

I challenge you to do this calculation monthly during 2015, and work on increasing your net worth every month. I think you’ll be amazed at how this simple strategy can transform your finances.

The best part for me? I no longer lie to myself.

Hugs,

The signature for Eliza Cross

Coin photo: Images of Money

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.

12 comments to January Money Diet Day 3 – Time To Calculate Your Net Worth

  • Jennifer

    Yikes! This exercise terrifies me! Honestly, I don’t even balance my checkbook. This is a good wakeup call so I’m going to give it a shot. I’m glad we decided to buy a home years ago. I’m thinking that will be what keeps me out of the red 🙂

  • Lynn Louise

    This is wayyy hard for me because we have a farm and all the expenses/assets that go with that. It is it’s own business so I have to focus more on my personal intake and output with money rather than our overall financial picture. I do feel like I have my credit cards/savings/checking all under control so will focus on curbing the shopping to save more.

  • I do this as a regular practice twice a year, however I am never clear about the value of my biggest asset – home equity. There are a lot of factors involved so I never feel really clear even if I use Zillow.
    I will say that staying in touch with these numbers keeps me on track with my goals and can even be empowering.

  • Lyn

    This is such a great exercise. Eliza, I love your honesty about your own experiences. It is true that you can save $100 and put it in the bank, only to spend twice that the next day. While my husband and I are generally in the black, we are eager to get rid of our home equity debt (our Mortgage is not as big a deal to us as it has a fixed IR), which will begin having a variable IR in 18 months. We live in a college town and are thinking about ways to have our house earn money for us by renting it out during graduation weekend and reunion weekends. Our goal in January is to create an ad and distribute it to the appropriate people… Thank you once again for helping us hold ourselves accountable!

  • Georgina Bowie

    Unfortunately I don’t really have any assets (bar a chest of draws that’s a family air-loom), but I do have quite a bit of debt I’ve been trying to pretend doesn’t exist. Definitely time to look that in the eye and sort it! Time to write all the numbers down….gulp!

  • Laura

    I am an avid user of mint.com. If you add all your accounts and enter in info for your house and vehicle you can easily track your net worth monthly while putting yourself on a budget. You can even create goals to pay down your debt using the software. I love it and am now addicted. 🙂

  • Kelli Tolstoy

    Well, Day 3 challenge has proven to be an eye opener. I am in the positive column but I had also pledged to work on becoming debt free. I researched several methods and found Dave Ramsey’s Baby steps to Financial Freedom the best for me. I already made a Debt Snowball Chart starting with my January payments. You just add extra to one payment each month, i.e. If monthly payment is $25 make it $125. Make regular monthly payments on rest. When the first debt is paid apply that $125 to the regular of another debt and so forth. I will have 3 out of 5 credit cards paid in 13 months adding another $3113.00 to my net worth!♡

  • Tricia

    This was an a good challenge. And about what I expected, as I did this a couple times last year as my husband and I planned for the future.

  • Baylee

    Well… I am 24 years old and live in military housing so I have no house mortgage/equity… I do have student loans and a newer vehicle with payments… I was so scared to do this… But with money saved up and checking accounts (I didn’t even include my Hubby’s savings…) I have -9,000 net worth… I guess that isnt too bad for being a stay at home mom

  • Catherine Godfrey

    OMG This exercise was an eye opener. We don’t a home any longer we sold to get a out of a bad neighborhood. We have been renting the last 3 years & I like it. Our net worth however is not where I want it to be. The number’s didn’t even seem real. I would like to have a net worth of @ least $100,000 by the end of 2015. It’s nice to know I’m not the only person terrified of this exercise.

  • Lisa F

    I keep saying Im going to figure out our net worth. I keep feeling too nervous to do so. Haha. We are in a much better place financially, but I seem to live in the past. Remembering the feeling of being upside down in everything. Since we got serious and I started tracking every penny, I dont cringe on bill paying day. That is progress.
    Time to calculate our net worth….Im just gonna do it….here I go now….

  • Cindy

    I used to not pay attention to my retirement account statements. Now I look at them every month. I also look at my bank account statements every month and smile with glee as they continue to increase. I have automatic deductions come from my checking account to my savings account and retirement account each month.

    My only liability is my house payments, so even without figuring my net worth exactly, I have a pretty good idea of what it is and how much it is increasing.

    I am putting the maximum amount in my retirement account this year for the first time, and it feels great.

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