What is your Net Worth?
What is the point in saving and investing your money? The underlying reason should be to build your net worth up. Your current net worth is the result of everything you’ve ever earnt and spent in your life.
It is essentially the difference between what you own and what you owe (assets vs liabilities). Your assets would be things such as the amount of money in your bank account and the value of any investments you hold. A liability is essentially anything you owe, such as a loan or debt from a credit card.
It is a snapshot in time of the total amount of wealth you have to your name. Knowing your net worth is crucial in understanding what your exact financial situation is. Finding out what this is for the first time might be quite shocking to some of you, but it is another step in the right direction to taking control of your financial situation.
Why Track your Net Worth
By focusing on growing your net worth it will provide you with more control over your life. This is because the greater your net worth the more financial firepower and flexibility you will have over your life.
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"WEALTH IS THE ABILITY TO FULLY EXPERIENCE LIFE" - Henry David Thoreau
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The two biggest things that I believe wealth can buy is your security and your freedom. By having a large enough net worth you will be secure no matter what the economy is doing or what your job status is. You will also have the freedom to choose what to do with your time, as you will no longer be tied to slaving away in a job you don't enjoy.
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"TIME IS MORE VALUABLE THAN MONEY. YOU CAN GET MORE MONEY, BUT YOU CANNOT GET MORE TIME" - Jim Rohn
How to Track your Net Worth?
Tracking your net worth is a task that will take roughly 10 minutes of your time to update each month. All it requires you to do is to input some numbers into a spreadsheet.
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I have created a spreadsheet via Google Sheets you can download for free using the button below.
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Benefits of Tracking your Net Worth
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1) Motivated to grow your Net Wealth
Spending money can provide you with instant gratification. Delaying gratification through putting off spending to grow your net worth, may not feel incredibly rewarding at the time. By tracking your net wealth over time it allows you to see the results first hand of saving your hard earned money. This is a rewarding process and can provide further motivation to grow your net worth through saving and investing even more.
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2) Spend Wisely
When tempted to make a bad decision with money you will be more aware of the impact to your net worth. By understanding the extent to which your financial decisions impact upon your ability to grow your net worth from month to month, will lead you to making better choices of how to use your money. As a result your net worth is likely to grow at a greater rate than if you didn’t understand how the financial decisions you make can harm your net worth.
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3) Eliminate/Avoid Debt
Debt can have crippling effects on a persons ability to grow their net worth, which may be growing month to month. Understanding how the extent of the debt you carry has an impact on your net worth can encourage you to ensure that your debt doesn’t become out of control. Seeing how debt can impact your net worth can also help you stay away from taking on more debt in the future, which is extremely beneficial to your financial health.
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Summary
By tracking your net worth over time you will clearly see your progress towards your financial goals. Whether that’s to be financially secure, retire early or buy a property, tracking your net worth allows you to see when exactly you have reached these goals. If you don’t want to live a life in which you are restricted by money then tracking your net worth every month is key.
Any successful business ensures that it stays profitable every month because it is vital for the health and success of it going forward. Think of the amount that your net worth grows each month as your profits and know that it is vital to your future.
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“MILLIONS WISH FOR FINANCIAL FREEDOM, BUT ONLY THOSE THAT MAKE IT A PRIORITY HAVE MILLIONS” – OSCAR AULIQ-ICE