How to Know Your Net Worth and Why It Matters

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I graduated from college in 2000. I was caught up in the dot com crash and after 9/11, when Bin Laden attacked America the job market bottomed out. My wife and I couldn’t find steady employment for over 6 months and were forced to live on credit cards. My wife even went back to take one college course because it was cheaper than paying her student loans.

It took me years to dig out of the debt that graduating at the wrong time caused. And 100% of this was out of my control.

It wasn’t until my mom died in 2013 suddenly at the age of 52 from heart disease I followed the money lessons I was taught at home.

If you are like me and most people those money lessons were pretty much non-existent. No savings, credit card debt, refinancing a home to pay off that credit card debt to repeat the cycle every 5 years. No investments and no understanding of how any of that works.

After my mom died and I put half the cremation costs on a credit card because I didn’t have $300 in any account I owned. It was at this point I realized I didn’t want to die in my 50s and leave my wife and son in the same position. So I started reading hundreds of books and watching thousands of hours about finances.

Every single one of these sources talks about knowing your Net Worth. So what is it and why does it matter?

This post may contain affiliate links which means that I may receive compensation at no extra cost to you if you make a purchase from a link found on my site. Please review my privacy policy for further details.

These ideas are based on my personal experience and opinion and should not be considered professional financial investment advice. Furthermore, the ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

Why Knowing Your Net Worth Matters

Your net worth is the total value of all your assets minus any debts and other liabilities you may have. It’s an important number to know because it can give you a snapshot of your financial health and help you make better decisions about your money.

An asset is basically anything that puts money in your pocket. A liability is anything that takes money out of your pocket.

Many Americans have almost no real assets. Read that statement one more time. Yes, most Americans have almost no real assets.

Your paycheck isn’t an asset it is income. Assets are anything you own that makes you money. Typically these are defined as stocks, bonds, intellectual property, royalties, and rental properties. If you want to learn more about assets and liabilities read this great article by Robert Kiyosaki, author of Rich Dad, Poor Dad (a book I highly recommend).

There are a few different ways to calculate your net worth. The most common method is to add up the value of all your assets and subtract any debts you owe. This includes things like your home equity, savings, investments, and retirement accounts. Note: your home is only an asset when you sell it, but you can use it to figure out your net worth. The issue is to make sure that most of your net worth is not the place where you sleep as you don’t want to rely on selling your home in retirement to eat.

Knowing your net worth can help you make informed decisions about your finances. For example, if you’re considering taking on more debt, you can use your net worth to determine whether or not you can afford it. Or, if you’re looking to make investments, knowing your net worth can help you identify how much risk you’re comfortable taking on.

How to Calculate Your Net Worth

Grab a piece of paper or use Personal Capital (more on this in a moment).

Write down the word Assets. List out the amount in your savings account, an estimate of what your home is worth, the amount of money you have in your IRA / 401k / crypto accounts / other places you have money stashed away.

Now write down the word Liability (or Debt if that is more helpful). List out the amount left on your mortgage(s), credit card debt, student loan debt, hospital bills, car loans, personal loans, and anything else you may owe to someone.

Now the least fun part if you are just starting this journey. Add up the asset column and subtract the liability or debt column total.

Take a deep breath. You have done great.

It doesn’t matter what this number is and it may be less than $10,000 or even negative and that is ok. The first part of changing your life is knowing the truth and then taking action.

Need to Save More Money?

Would you like to know how to save $3000 in 3 months or 6 months?

Maybe you are just looking to develop good habits to have an emergency fund to stop living on credit card debt.

Check out my article for many easy-to-use tips, regardless of your income, to save money in the long haul that doesn’t look like “Just use door dash.”

Click here to learn how to save $3000 in 3 months.

Fastest Way to Check Your Net Worth

If all of the above seemed like a lot of work and potentially pointless because your 401k is dropping or rising (most likely both in the same day) then I have a better solution for you.

I use Personal Capital to track my net worth.

Pros:

• Free to sign up
• Tracks checking and savings for modern banks
• Tracks IRA / 401k Info
• Integrates with Coinbase for tracking your crypto
• Integrates with Robinhood and other trading apps
• Pulls data from Zillow for an estimate of your home and other properties
• Gives you an easy net worth number at the top of the web page or home page of the app

Cons:

• You need to link your accounts
• Some banks don’t allow this (mine doesn’t so I do everything else)

One last pro if you use this link and create a new account. You and I will get $20 from Amazon if you connect a retirement account with at least $1000 in that account. Personal Capital just reads the information. You can’t make any changes to your accounts inside of Personal Capital. It just reads the data.

Why should you track your net worth over time?

The Importance of Tracking Your Net Worth Over Time

Your net worth is the total value of your assets minus your liabilities. It’s important to track your net worth over time because it can give you a good indication of your financial health. If your net worth is increasing, it means you’re doing a good job of saving and investing. If it’s decreasing, it could be a sign that you’re spending too much or taking on too much debt.

Tracking your net worth can help you make better financial decisions and achieve your financial goals. For example, if you want to retire by age 60, you’ll need to have a certain amount of money saved up. Tracking your net worth will help you see how close you are to reaching that goal.

If you have a family, tracking your net worth can also give you peace of mind in knowing that you’re financially prepared for the future.

Where Is Your Money?

Most people don’t know what they are invested in when they start a new job and open up a 401k.

Do you know exactly what the fund or funds you are investing in even are?

How much are you spending on fees?

What if there was a way to invest in the biggest companies in the world easily and with fees less than 0.1%?

Click here to read how to invest on autopilot to learn more.

Why Your Net Worth is More Than Just Your Assets and Savings

Your net worth is more than just your assets and savings. It’s a measure of your financial health and stability, and it can be a good indicator of your future success.

Your net worth can also be a good indicator of your future success. If you have a high net worth, it means you’re on a solid financial footing and are likely to achieve your financial goals. On the other hand, if your net worth is low, it could mean you’re struggling financially and may need to make some changes in order to reach your goals.

If your net worth is too low you WILL be dependent on someone else when you get older. My wife was a home hospice chaplain for several years. She would come home and tell me stories about the financial insecurity of her clients. Many were barely able to stay in their home. But some of those homes had leaking roofs and cracking foundations that were detrimental to the person’s health but they had no money.

Social Security in America is running out of money and no one is working on a solution as I am writing this. I hear that by 2035 the amount going to Social Security recipients will drop by as much as 25% a month. If this is your ONLY SOURCE OF INCOME can you imagine trying to take a 25% pay cut in your 70s, 80s, or 90s?

Knowing your chances of financial success is what you owe your future you. If you don’t care about yourself in 20 – 40 years think of your spouse and kids. When my mom died there was no life insurance. No money in savings. My sister and I had to scrape together enough money to cremate her and her ashes are actually still in my garage.

You have an opportunity to change your future today.

Are you living your best life or are you stressed about paying the bills?

In this quick 2-page PDF, I cover 5 ways you can get your financial life back on track.

I used to live paycheck to paycheck and after years of paying off debt and maximizing my investments I am now able to save and invest more than 45% of my wife and I’s gross pay.

This allows me to live comfortably (not a crazy rich person) and sleep better at night. If you want this let me know where I can send it to you below.

Wow, you read a lot to get here. Can you do me a favor, please? Can you leave a comment if this was helpful to you or if I missed something? Alternatively, it would help me out a lot if you shared this content with those that might need to see it. Thanks, you are the best!

These are The Benefits of Knowing Your Net Worth

Tracking your net worth is much easier with a tool like Personal Capital (and you can make $20 if you use the link and connect to a retirement account – like Fidelity / Vanguard / Voya / etc. in the first 30 days) because once your accounts are linked you have a single place you can watch your net worth.

One other bonus of Personal Capital is there is a retirement planner that analyzes your spending / investing and fees on investing to see if you are on track to retire by a certain age.

They run thousands of simulations to see what your chance is of outliving your money, which is scary.

Once you are actively tracking your net worth you will start to make smarter decisions around your spending and paying off debt.

Take control of your financial life today and download Personal Capital today.

About Dwight Scull

I have been married to my wonderful wife, Rebecca, who puts up with me since 1999. I am a proud father to my Gen Z, son, and daughter-in-law. Grandfather to my favorite granddaughter who was born in 2021.

I lost my mom, father-in-law, and 12 others in 2013 and was DEEPLY in debt. I started reading and watching all the financial info I could find.

I chipped away at my debt and went from a negative $105k net worth having one home paid off, no credit card debt, and saving/investing 45%+ of my gross salary.

I used these daily habits to lose 100 pounds and keep it off.

I believe that you can overcome any challenge you face if you just take small daily actions and be consistent with them. It is how you will be financially successful.

Join my free Facebook group to get a ton of free resources to help you get out of debt, learn how to invest your money and work toward having the option of retiring early.

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