What is net worth, and why track it?

Your net worth is the current value of everything you own, minus everything you owe. FINRA uses this formula to bring your assets and debts into one calculation. When your money sits in several accounts, adding those balances together gives you a number you can follow over time.

Suppose your retirement accounts hold $90,000 and you have $35,000 invested elsewhere. With $15,000 in cash and a car worth $18,000, your assets total $158,000. You also owe $18,000 on student loans and $10,000 on the car. Subtracting that $28,000 leaves a net worth of $130,000.

If your debts exceed the value of your assets, the result falls below zero. Keeping that negative figure gives you a starting point for following changes as you save or repay debt.

Those figures are invented for this example. They use current balances and exclude taxes or fees from selling assets. Your own record should say which assets you included and the date you valued them.

Keeping the earlier figures lets you investigate a change. If your net worth rises by $2,000 during a month, check how much you saved and what happened to your investments. Market prices affect the result even during months when you leave every holding untouched. A transfer between two accounts you own leaves the total unchanged, assuming there are no fees.

In Sumio, you can record your assets and liabilities together and follow their values over time. It works without linking accounts, so you can begin by entering balances yourself.

If your total includes a home you plan to keep, record which other assets you expect to draw on for retirement spending. Add a note about when you expect to use that money.

Choose a date for your next review and save a copy of this month's figures. When you update an estimated value, such as your car's resale price, record where the estimate came from so you can use the same method next time.