A few years ago, back when I was a fresh college graduate fella, I probably had an abysmal net worth. In fact, like most college graduates and millennial’s, I was most certainly in the red. I would bet money with 100% certainty (I won’t, considering how well last month’s poker sessions went), I hadn’t even thought of having a net worth goal. C’mon, I was too busy living beyond my means to be bothered with that.
Fast forward to a slightly smarter, self-aware, me, I’m looking for ways to build my net worth. Knowing my net worth (or my assets minus my liabilities) has some great benefits:
- It gives me a baseline, a starting point, to track my progress
- It holds me accountable to owning more and owing less
- Quite frankly, it’s euphoric seeing it grow. The progress becomes tangible almost.
If you haven’t considered it, I’d suggest calculating your own net worth.
Doin’ The Math And Net Worth Goal Settin’
Figuring out my net worth is pretty simple math (thankfully). For the first part of this calculation (assets) I’m including:
- Cash (Savings only)
- Roth IRA’s
- KBB Car value
Perhaps I shouldn’t consider my car an asset considering how quickly I could sell and for how much is uncertain. After all, it’s a depreciating asset and will only decrease over time. But I’m going to, anyway.
For my liabilities or what I owe I’m including the only debt I have:
- Car Loan
So, let’s see what all this looks like as of the publishing of this post:
I’m only including my savings (E-Fund) when it comes to cash because if I were to include my checking account, it wouldn’t be accurate month to month.
My current goal is to hit a one years salary in net worth by 2018. This is just my personal benchmark based on other charts on the internet I’ve come across a thousand times.
I consistently invest $200/month into my Roth IRA and $300/month or so goes into my 401k’s, for a total of $3500 in additional investment money (not accounting for what the stock market does) by the end of the year. All while paying off debt.
The good news is that I should be right on track to hit this goal, or pretty damn close at the end of the year. The consistent investing and debt pay off should merge beautifully.
Should You Even Bother With Your Net Worth or a Net Worth Goal?
I think everyone should, personally. It’s like getting a physical at the doctors. Wouldn’t you want to know you’re healthy rather than just assume it? If somethings wrong, you have the opportunity to fix it.
I want to know mine for just basic financial health reasons and so I can do better. If you plan to retire early, it’s an even better idea to monitor your net worth and have a net worth goal in mind so you know exactly when that early retirement day comes. I’ll let you in on a little secret on retiring early from someone who is living it, you can retire when your nest egg is about 25 times your annual spending.
That’s the connection between all this frugality, spending, and net worth tracking. They all come together in a big gumbo of financial freedom.
To make it easy, I use Personal Capital. It helps see the numbers and progress fairly easily. In fact, you can go back and compare date ranges from where you started. I decided to go back about a year and I’m pretty happy with my progress.
This includes ALL my accounts. The number is a little off because it includes other cash accounts that I chose to exclude. Obviously it doesn’t have the KBB car value in there either. But let’s just focus on that graph for a moment, I’m just happy that the line is on a steady climb!
I’m gonna crush this goal along with the paying off my debt. Once it’s on the internet, there’s no turning back now. Once the debt’s gone, I’ll increase the investing across all areas and who knows, maybe next year it’ll be the six-figure goal line.
That’s my net worth goal. What are your net worth goals and how are you working towards them? Have you crushed any yet?