If you have even a tiny competitive bone in your body then you will get a hit of dopamine doing this very simple scorecard: track your net worth.
NET WORTH: A snapshot of your financial health that takes what you have and subtracts what you owe to give you a (hopefully) positive number. E.G. If you have $1000 in savings, checking and investments but you owe $300 on your credit card or a balance on a car, then you would have a Net Worth of $700. If you don’t owe anything, then your net worth is $1000!
You can be as fancy as you like or as basic. There are many apps and programs that will track all your accounts in one place (go for one with a fee to improve security and privacy). My preferred program is Quicken. I manage all my household accounts, real estate and investments through it. It has a lot of tools and does a great job of snapshots. When I started getting a grip on our finances, however, it was just a basic excel sheet. You could even keep a notebook. You can update it monthly so you ca track your progress.
Calculate your net worth:
- Write down the balances of all your bank accounts, investment accounts, retirement accounts, the value of any real estate if sold today
- Total those accounts. This is your ASSET column
- Now write down everything you owe: personal debt, loans, student loans, mortgages, credit card balances. This is your LIABILITY column
- Now subtract your total LIABILITIES from your total ASSETS.
- This is your net worth. If it is a positive number, congratulations! You have a positive net worth. If you owe more than you have, your net worth will be negative.
Start tracking your financial net worth so you can track your progress. Don’t compare yourself to others. This is a customized journey and you are only competing against your yesterday self!