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How to create a monthly personal financial statement to track your net worth
Do you want to know the single most important tool I use to manage my personal finances? It is going to surprise you.
The best personal finance tool I use is my net worth tracking spreadsheet.
I’ve found that tracking my net worth is the single best way of keeping myself on track to meet (and hopefully exceed my financial goals).
Yes, I still budget and do all the other financial planning I love, but the simple act of watching my assets grow and my liability’s shrink (hopefully) has really incentivized me to keep my spending in check.
What is your net worth?
Finding your net worth is done by using a very simple net worth formula.
Assets – Liabilities = Net Worth
Your assets are items with a tangible value associated with them.
For example, your house, car, checking accounts, jewelry, retirement accounts are all considered assets.
Liabilities, on the other hand, are items associated with loans. If you owe money then it is a liability.
For example, your home mortgage, student loans, car payments, personal loans and other loans would be considered liabilities.
To find your net worth you are taking the value of all of your tangible assets and subtracting anything you owe money on to get your net worth.
You can have a positive net worth if your assets are greater than your liabilities or a negative net worth if your liabilities are more than your assets.
Some people also call this a personal asset statement or a personal finance statement. All of these terms are correct, the important thing is that you are tracking your assets and liabilities.
What Should You Include In Your Net Worth Calculations
What you include in your net worth calculations from a personal financial statement is very subjective. I recommend including only the big items on your list rather than getting yourself bogged down in the details.
For example, when preparing a personal asset statement, I give a general value to my vehicles. I’m not going to take the time to run a Kelly blue book on my vehicles every month to get an exact value. No one has time for that!
Same with my house, I don’t run comps and get a formal price quote every month when compiling my numbers.
When I’m putting together my net worth worksheet, I estimate certain values like my home and car values.
I do always take the time to get exact balances in my various bank accounts and retirement accounts.
I also get exact balances for any outstanding loans.
I don’t, however, worry about exact balances on my credit cards. I pay mine off every 1-2 weeks, so I do whatever balance is listed when I pull my numbers. So when I’m doing my credit card balance it may actually be the balance from the 5th when I calculate my monthly net worth report.
If you carry balances in your credit cards then you definitely need to include that full liability on your net worth spreadsheet.
As you begin tracking your net worth you’ll begin to find a method that works for you. The important thing is to be consistent and always do your calculations the same way.
For example, with my vehicles, I redo my values on an annual basis. This way it is pretty close to accurate but doesn’t take so long that I lose interest in tracking my net worth.
In general, below are items that should be included as assets on your personal financial statement:
• The current value of your home
• Value of vehicles
• Savings/checking account balances
• Retirement account balances
• Stock account balances
• Cash Value in Life Insurance Policies (not the death benefit)
• Large Toys – RV’s/ATV’s/Boats/Camper/Motorcycles – remember to value these on the low end, it is hard to get top dollar on these items if you need to resale
• Rental Property
• 529/ESA Accounts
• HSA Accounts
• Personal property – Jewelry, camera’s, computers and other personal items (I personally don’t include these items in my net worth calculations. They are hard to assign a dollar value too and honestly, are rarely worth anywhere near as much as people think they are).
• Other miscellaneous assets you may not have already included
Liabilities to include on your personal financial statement:
• Mortgage Loan
• Car Loans
• Student Loans
• Medical Debt
• 401K Loans
• Personal Loans
• Credit Card Balances
• Other Miscellaneous loans
What not to include in your personal finance statement:
• Rent Payments – Rent is neither an asset or a liability in account terms and shouldn’t be included in your personal net worth.
• Regular budget items like grocery shopping, clothing, entertainment – These items (and rent) are reflected as part of your checking/savings account balances and don’t need to be included as line items on your personal net worth.
How to Track Your Net Worth
Once you have got a list of your assets and liabilities it is time to start tracking your net worth.
I personally use a simple net worth tracker spreadsheet I created on excel. It is super simple as you can see below.
You can go crazy elaborate and track all kind of extra’s, but I’ve discovered that for me, simple is best.
You are welcome to use my Net Worth Tracker Spreadsheet (it is in Google Docs, so make sure you copy to your own folder or everyone can see your numbers).
If you aren’t an excel fan I’ve created a simple net worth tracker PDF you can download as well. It is a simple financial snapshot template that you can use to fill in the blanks.
If you have questions on how to use the tracker I created a quick video to help you get started.
Why You Should Track Your Net Worth
Once you’ve done your first net worth equation it is super easy to track the amount every month.
I’m in my 40’s now and I want to make sure that I’m prepared for retirement (I just dumped my 401K) and am really focused on building my wealth every single month.
As I mentioned above having a net worth spreadsheet makes it very easy to see at a glance how well you are doing financially. This is particularly true when you track your net worth over an extended amount of time.
I’ve been tracking mine for over a year now and have been amazed at how much it incentives me to control my spending.
There is nothing worse than seeing your net worth decrease month over month.
I’m probably the dorkiest person ever, but when I see my worth go down I always start digging for answers as to what has happened.