Talking about net worth isn’t just for the rich and famous. It’s important for everyone to be aware and conscious of where they are financially.
Tracking your net worth forces you to have an honest look at your current situation and it paints an accurate picture of where you stand financially. Your net worth can be determined by simply calculating your assets (checking, savings, emergency fund, etc.) and subtracting your liabilities (credit card debt, student loans, car loans, etc.).
How much are you worth? Do you have any idea? Most people don’t, which is one of the main reasons why it can feel like it’s so difficult to get ahead in the money game. We are always so concerned with our bills and monthly expenses that we tend to forget to focus on the most essential action of the game, paying ourselves first. Paying yourself first helps you to secure a move in the right direction by making sure before any expenses or debts are paid that you are setting aside funds for yourself. This helps you build up the assets side of the net worth equation. This also helps make sure that you don’t short change yourself at the end of the month where normally you save what’s left over and instead you’re spending what’s left after you save.
Don’t be alarmed if your net worth is in the red. These days with student loan debt at astronomical levels, the majority of the millennial generation is bound to start out with a negative net worth. What makes all the difference is the complete awareness of those liabilities and the focus that’s put on blasting away the debt as soon as possible.
Calculating your net worth regularly gives you an up to date snapshot that tells you which direction you’re heading. On any given month you can be moving forward, backward, or remain stagnant, depending upon your ability to earn income, pay down debts and spend within or below your means. Whether you are still in school or just starting out in the real world, tracking your net worth is an essential piece of your financial foundation and a great start to winning the money game.