Should I Track My Net Worth?

Your net worth is kind of like your financial progress report. It’s a tangible measure of where you’re at financially. But I’m glad that my favorite net worth tracker doesn’t chastise me for my shenanigans like my schools did growing up.

First of all, what is net worth?

Net worth is the total dollar value of all of your assets minus the total value of all of your liabilities. Assets are things that grow in value and/or generate cash flow like stocks, bonds, and real estate. Liabilities are the things you owe money on, like a mortgage, student loans, or credit card debt.

Robert Kiyosaki, author of Rich Dad Poor Dad, states it simply: an asset puts money in your pocket every month and a liability takes money out of your pocket.

For example, if you have $100,000 worth of assets and $40,000 worth of liabilities, your net worth is $60,000.

If you have more liabilities than assets, your net worth can be negative. Ideally, this isn’t the case.

Everyone has a net worth, whether you know it or not. Not just the CEOs I like to Google to check their net worth out of curiosity.

So we know what net worth is, but should you track it?

Absolutely, but not obsessively.

It’s hard to know how you’re progressing toward your financial goals if you aren’t keeping track. Especially if you’re planning for early retirement, it’s important to have a clear picture of your finances so you can make adjustments. Otherwise, you might hit your target retirement age and find you’re significantly short of where you need to be.

Tracking your net worth progress can motivate you to stay the course as well. My wife and I like to celebrate every net worth milestone so we enjoy the journey a bit more. Like my struggle to grow my legs from lifting, it’s hard to keep putting in the work if you’re not seeing the fruits of your labor.

Now, a quick disclaimer when it comes to tracking your net worth.

You can include your personal residence home equity in your net worth, but don’t include it in your retirement calculations.

Including your home equity in your net worth will give you a false sense that you have more money to live on than you actually do. The $100,000 in home equity you may have is cool, but it’s not money that you can live off of.

The only situation where I recommend including your home equity in your retirement calculations is if you plan on selling your residence when you retire, investing that money, and living a minimalist lifestyle under a bridge.

Unless you’re a glutton for punishment, I don’t recommend tracking your net worth manually or with a homemade Excel spreadsheet with some sweet add and subtract formulas. There are plenty of apps out there that can do the annoying work of compiling your financial data for you.

I’ve only ever tried one net worth tracking app, Empower, but I see no need to try another because this one is great and free.

With Empower, you can connect all your financial accounts (bank accounts, investment accounts, mortgages, credit cards, and more) and the app will automatically update your net worth in real time.

Empower makes money by offering other financial services after they rope you in (which I don’t use or necessarily recommend using). The app also has a budget tool if you’re into it (I’m not) and a retirement planner snapshot which I like.

There are other net worth apps out there like Rocket Money, Exirio, and Copilot that have good reviews and offer paid monthly or annual subscriptions.

We’re not sponsored by Empower, but I’m expecting them to come flocking to us after this newsletter drops.

Tracking your net worth is a necessary step to best achieve your financial goals. You don’t need to be glued to your net worth tracking app (nor should you), but a monthly or quarterly check of your net worth can help you see how you’re progressing toward where you want to go.

Call to Action

Check out the existing net worth apps on the market and see if one works for you.

What We’re Reading/Watching/Listening To:

Mr. McMahon on Netflix. This documentary is incredible. I was never into professional wrestling, but my cousin was a DIE-HARD wrestling fan growing up so we threw down with some WWE action figures once or twice. The things Vince McMahon and the WWE got away with back in the day is truly insane.

Debrief on Deck

Next week, Wilson will look into the world of venture capital. VC is like the riskier, mildly unhinged cousin of private equity.

As always, please reach out to us with any questions or comments you have. You can reply directly to this email or find us on social media (X (formerly Twitter) and Instagram).

Until then, stay the course.

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