How Net Worth Tracking Makes You Wealthier

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Editor's Note: This story originally appeared on NewRetirement.

Your net worth (your assets minus your liabilities) is an important snapshot of your entire financial life.

So, tracking net worth is an easy way to assess your overall current and future financial well-being.

Here’s how you do it, and why it can make a big difference.

How to Measure Net Worth

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First, decide if you want to know about your financial situation today (current net worth) or what you will have in the future (your net worth over time).

Your current net worth is everything you currently owe (all debts and liabilities, including your mortgage) subtracted from the value today of everything you own (assets, cars, homes, and investments).

Most net worth apps focus on tracking current net worth. However, your future net worth may be what’s really important.

Your future net worth is a projection of your current and future assets and liabilities. It also factors in your anticipated financial decisions (saving rates, new debts, and additional investments) as well as appreciation, depreciation, inflation, and rates of return.

Current net worth is a simple formula. Calculating future net worth can be a little trickier, but it is arguably much more important.

The NewRetirement Planner will show you your current net worth as well as a reliable projection for your net worth in every future year. See your net worth:

  • Next year
  • In 10 years
  • At retirement age
  • Assess in which year you are wealthiest
  • Appraise your net worth at your longevity
  • Consider your net worth at every year in between

Today’s Net Worth Is an Important Indicator of Financial Health

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Tracking today’s net worth is a simple way to assess your current financial health. It is akin to measuring how many push-ups you can do as a measure of your physical health.

And, just as the number of push-ups you can do is a reflection of your diet, hydration, physical fitness, heart health, and more, net worth assesses everything related to your financial health, particularly the relationships between your income, spending, debts, and saving.

Tracking Your Future Net Worth Enables You to See Your Financial Trajectory

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If your current net worth is like how many push-ups you can do, then your projected net worth is all of your possible health goals and a plan for achieving them.

What do you want for your future finances? And, how are you going to get there?

Tracking future net worth requires that you make a financial plan. This enables you to project what happens if you keep doing exactly what you are doing? If you reduce expenses and save more? If inflation persists? If you buy a second home? If you retire early?

Projecting and tracking future net worth enables you to assess your future financial security under a variety of conditions. (The NewRetirement Planner enables you to run scenarios and project your future financial health with almost any possibility you can imagine.)

Most importantly, you can assess if you are on track to achieving the life you want to live.

Track Your Net Worth to Make Better Financial Decisions to Achieve Your Goals

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“If you can’t measure it, you can’t improve it.”

Peter Drucker

To achieve goals, you have to know where you are now and know where you want to be. Net worth gives you a metric to improve over time. And, measuring net worth enables you to see what really matters. What actions have or will increase your value over time.

Tracking current net worth can help you move toward your long-term money goals faster by enabling better financial decision-making. Save, invest and avoid high-cost liabilities.

It Is a Simple but Impactful Habit

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Exercise is a habit that improves physical health.

Net worth tracking is an incredibly simple habit that will improve your financial health, now and in the future. It is an easy task that will get you to think about your money and the decisions you are making today. It will also help you achieve the future you want.

When you track your net worth, you are giving attention to your financial life, which will help focus you on what really matters.

Select a day of the week or month to track your net worth. Put it in your calendar, on your to-do list, or set reminders.

Less Stress and a Greater Sense of Control

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Stress often comes from feeling that something is outside of your control.

Sure, financial stress can be a matter of not having enough resources. But, it can also come from not knowing exactly what you have and the nagging doubts that it simply won’t be enough.

By tracking net worth, you are taking more control over your financial destiny. You might not always like what you see, but you will be assured about where you stand and what you can do to improve your situation.

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