Run a quick health check of your finance with this net worth worksheet. Follow the step-by-step guide to make sense of your money.
How wealthy are you? Most of us don’t have the answer. I can’t, either. In fact, I had no clue about my finance for a long time.
I used to think that as long as I can pay my bills, there’s no reason to worry about my finances. At the age of 28, I found myself with almost no savings but liabilities. I had been working. But where did all the money go?
From then on, I start to track my net worth every three months. The first time, I have a negative number. And it was painful to face reality. But now it’s been 3 years. I cut off a lot of unnecessary expenses and start investing. And my net worth went from negative to positive. The pain is worth it.
When it comes to developing a good habit, simplicity is key. The net worth worksheet I use for calculation is extremely helpful and doesn’t over-complicate.
You put in all the numbers, including your asset and your liabilities. And you have the result. As someone that is not savvy with numbers, I get a clear vision of my finance at a glance.
Want to start tracking your net worth? Here’s a simple net worth worksheet I have been using for the past 3 years. Download, print it out, and start taking control of your money. If you prefer to keep it digital, I’ve also created an net worth template spreadsheet.
Why it’s important to know your net worth?
Your net worth is a key index of your financial health. Personal finance professionals have shared their ideas on tracking net worth. If they do, maybe you should, too.
We all have a dollar in mind that makes us think, “I’ll never see that kind of money,” but you have to give yourself a chance.
– Alyssa Davies
You can identify all kinds of financial opportunities and traps by looking at the individual pieces.
– Amy Peveto
Calculating your net worth over time can show you if you’re moving in the right or wrong direction.
– Christy Bieber
By knowing where you stand financially, you will be more mindful of your spending, better prepared to make sound financial decisions, and more likely to achieve your short-term and long-term financial goals.
– Jean Folger
How to use a net worth worksheet to master your finance
Step 1: Calculate your net worth
Your net worth equals the worth of your total assets minus your liabilities. To calculate your net worth, you need to list all your assets and liabilities separately.
- Assets
There are two types of assets: liquid and non-liquid.
Liquid assets stand for those that are either cash or can be converted to cash shortly. They are the safety net of your finance. From grocery to unexpected medical bills, cash covers both the basic and emergency expenses.
Non-liquid assets refer to those that can’t be converted to cash immediately. And the conversion usually involves certain evaluation procedures. Take the house you live in, for example. Unlike stocks, a house doesn’t have a real-time market price. And it’s not quite possible to sell it and cash out in one day. That’s why most real estate properties are non-liquid assets.
- Liabilities
Liability refers to the property you owe to others. Unlike assets, liabilities don’t generate profit for you. Instead, they take away part of your income. Loans and mortgages that you have to pay off later belong to this category.
To calculate your net worth, fill in each of the metrics on the net worth worksheet. Then add up the total number in the Net Worth area.
Your current net worth = Total assets – Total liabilities
You can also set up a net worth goal and see the percentage you’ve achieved. As you track your net worth along the way, you will be clear about your progress. It will keep you motivated towards your financial goals.
Step 2: Evaluate your financial health
To help you better understand the meanings behind your numbers, here are some questions to ask yourself:
- Is my net worth positive or negative?
- What are my biggest assets? How can I grow them?
- What are my biggest liabilities? How can I pay them off sooner?
- Are my liabilities worth the money? What can I do with the same amount of money?
- My net worth goal is $_____ by the age of ______. I am ____% there, and I have ____ more years to achieve it.
Take a look back at the worksheet and answer these questions accordingly. Now you should have a better understanding of your current financial health.
Your first goal should be positive net worth. That means you own more than you owe. With that said, it’s ok if you are not there yet. It takes time to pay off the debts and save money. Make a plan. And you will get there if you keep working on it.
Step 3: Make a plan
Now you are clear where you stand. The next step is to think about what you can do to reach your goals. There is no one-size-fits-all solution. But here are some aspects to look into.
- Reduce your expense
Spending money mindfully is the foundation of financial health. It’s not about how much you earn but how much you keep. This is especially important if you have a negative net worth at the moment.
To spend less, you may want to:
- Track your expenses
- Make a need & want list
- Cut off unnecessary expenses
- Find cheaper alternatives to the essentials
Check out these financial bullet journal spreads that will make the process easier.
Step 4: Start saving
The first penny saved marks the end of living paycheck to paycheck. When you reduce your expense, you will have more money to put into your savings account. But saving is never the ultimate goal.
Like Dave Ramsey said, “savings without a mission is garbage.” That’s why you need to have short-term and long-term savings goals to make money work for you.
Short-term saving goals may look like this:
- An emergency fund
- A sinking fund for a car
- Money to pay school tuition
- First $1000 for the downpayment of the house
- …
Long-term saving goals may look like this:
- Money to start a business
- Fund to pay off mortgages
- $1,500,000 to retire at the age of 50
- …
Set up a savings tracker on paper, on your bullet journal, or on your computer. List your goals to keep yourself motivated.
Step 5: Start investing
To accumulate wealth, you have to make money work for you. Take a look at your current investments. What type of investment is bring you the most profit? Weigh in the risks and benefits and develop your investment strategy along the way.
Step 6: Renew your net worth
Your net worth will change along with your assets and liabilities. As you get better at managing your finance, your net worth will gradually grow.
I re-calculate my net worth every quarter. It’s the time to reflect on my decisions and decide whether I am going in the right direction.
Download the digital spreadsheet
Have you worked out your net worth?
If you have any ideas on managing your money wisely, feel free to share your thoughts in the comment!