Your Net Worth & Why It Matters

A few months after our second child was born, I worked up my courage, joined a gym and made an appointment with a personal trainer to get some help improving my fitness level and losing weight.

In the days leading up to my first meeting with the trainer, I was nervous, intimidated and worried about being able to physically complete the workouts. As it turns out, the most difficult part of working with a trainer (for me) was the initial intake session. Talk about a face-the-music moment. There is just no denying the numbers of various body measurements, weight, BMI, and body fat percentage estimates.

I am a nerdy numbers person and I like being able to quantify things, but it just isn’t quite as pleasant when those numbers represent the state of my health and show considerable room for improvement. And that was before we counted to see how many pushups I could do before collapsing in a puddle of my own sweat. Let’s not even discuss burpees or star jumps.

As awful as it was to be faced with the current state of affairs in numeric form, it was powerful in two ways:

(1) I knew exactly where I stood in ways that are measurable, objective and verifiable (even when attempting to camouflage with yoga pants and untucked shirts).

(2) I was motivated to change the numbers.

“What gets measured gets improved.” -Peter Drucker

Why should you care about your net worth?

Net worth is a big picture look that includes all your financial pieces and parts. It gives a better sense of your overall financial health.

Your checking account or savings account balance tells you how much cash you have on hand. Good to know, but doesn’t tell the whole story.

A credit score indicates your ability to borrow and repay debt, but that is just one piece of the puzzle.

Net worth captures, at a glance, all that you own along with everything you owe to others. An oversimplified version: If you sold everything you owned (for cash) and paid off all your debts, how much money would you be holding at the end of the day?

Going through a quick exercise of figuring out your net worth for the first time can feel a bit like being weighed and measured at the doctor’s office, but it is a powerful number to know, whether it is a gut check or confirmation that your hard work is paying off.

Take a few minutes and figure out your net worth. Knowing where you are at financially right now is really helpful in identifying what needs to happen going forward to accomplish your financial goals. There is something really meaningful in jotting it down in one place.

Make a list of your assets (bank accounts, vehicles, investments, real estate) and the market value of each item. Then make a list of your debts (credit card balances, vehicle loans, student loans, home mortgage) and jot down the balance on each of them. Your total assets minus your liabilities equals your net worth. Use my free worksheet to get started.

Total Assets – Total Liabilities = Net Worth

Tracking your net worth periodically over time is a great way to see your progress in black and white and keep you motivated. I think it is helpful to look at your net worth at least twice a year. We typically update our net worth every three months. It is helpful to see the changes over time and especially encouraging when your net worth is on an upward trend.

Some financial experts suggest only looking at your net worth once a year, but it is pretty hard to stay focused on making improvements to something you are only measuring annually (at least for me). I assure you, my attempts at maintaining a healthy weight while only weighing myself annually have not ended well. Ahem.

Celebrate the milestones along the way, too. A client of mine started his financial wellness journey with a negative net worth (owed more than he owned thanks to student loans) and achieving a net worth of zero was a big accomplishment representing months of hard work. It was great fun to help him celebrate that victory. A few years later, that same guy crossed the $500,000 net worth threshold and has continued to push ahead toward the million dollar mark. In just a few years (and a lot of hard work), he completely overhauled his financial situation and increased his net worth by $650,000. I promise he is an ordinary mortal like you and me. Handling your money with intention is so powerful. Get started today!

Do you know your net worth? Go now and figure it out. What’s your number? Better yet, what will it be six months from now? What does it need to be to achieve your goals? I would love to hear from you. Send me a note at strongerwallet[at]gmail.com.

I’m off to the gym to whittle away at a few of those numbers I mentioned earlier.

thanks for reading,

Lesley

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