DR 010: How and Why to Track Your Net Worth

This is the third day in our 31-Day Money Challenge. Over 31 days we’ll publish 31 podcasts, each designed to help you move closer to financial freedom. Yesterday we looked at how to set financial goals you’ll actually achieve. In today’s podcast, we discuss the importance of a net worth statement, how to prepare one, and how to use it to track your progress toward financial freedom.

Sponsors: The 31-Day Money Podcast is sponsored by Betterment and Personal Capital. Betterment and Personal Capital are two tools I use to make investing easier, less expensive, and more effective.

Net Worth

Financial freedom is not about how much you make, it’s about how much you keep. Building lasting wealth boils down to just two steps: (1) spend less than you make, and (2) invest the difference wisely. This is the formula for wealth regardless of whether you make $50,000 a year or $1,000,000.

In fact, there are many who made a modest income but were able to achieve financial freedom. These folks are the unsung heroes of money management. They don’t make the front page of the newspaper. Instead, like my grandmother, they are nurses in small towns in Ohio, living in a home that is paid off and building a comfortable retirement nest egg. How? By (1) spending less than they made, and (2) wisely investing the difference.

Wealth

Likewise, there are countless stories of professional athletes, lottery winners, and movie stars who made millions, but wound up dead broke. Why? Because they failed to (1) spend less than they made, and (2) invest the difference wisely. Ed McMahon. Vince Young (former NFL Quarterback). Sharon Tirabassi ($10 million lottery winner).

Financial Suffering

Do I sound like a broken record? Good.

And that brings me to today’s podcast:

Topics Covered

  • What is a net worth statement and how do you prepare one
  • Why you should not include your cars, furniture or other personal possessions in your net worth statement
  • How to use your net worth statement to track your financial progress
  • How most of the important financial goals (getting out of debt, saving for emergencies, saving for retirement) affect your net worth
  • The key relationship between your net worth and your monthly budget
  • How and why assets generate income
  • How and why debts generate expenses
  • The difference between those who build wealth and those who do not

Resources and Links

Day 4: 7 Tips to Effective, Stress-free Budgeting

Published or Updated: July 29, 2014
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. Dayna says:

    Hi Rob —

    The worksheet you link to, unfortunately is not bringing me to the .pdf.
    Maybe the link has changed since you posted it?

    Just an FYI.

    Your 31-Day Money Challenge is wonderful! Thank you!

    Dayna

    • Rob Berger says:

      Dayna, thanks for letting me know. It looks like they’ve removed it. Here’s another one that looks pretty good–http://njaes.rutgers.edu/money/pdfs/networthcalcworksheet.pdf

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