What is Net Worth mean anyway?
Net Worth is simply the current value of all your assets (bank accounts, house, car, collectibles, etc…) MINUS all of your debts (mortgage, student loans, car loan, credit card balances, etc…)
For example, if you have the following assets:
- A home with a current Zestimate of $100,000
- A car with a blue book value of $5,000
- $1000 in saving
- $5,000 in your employer 401K
The following debts:
- Mortgage of $70,000
- A car loan of $3,500
- $3000 credit card balance
Your net worth would be:
Assets ($100,000 + $5,000 + $1,000 + $5,000) – Debts ($70,000 + $3,500 + $3,000) = $34,500
Do you hate math? Don’t worry, there are free online apps/services that will do the math for you.
Pro-tip: If you would like to include the current value collectibles, art, or antiques, you may need to pay an appraiser. The value of collectibles, art, or antiques can change dramatically over the years based on current trends . Many “family heirlooms” that you were told were valuable may not have the resale value you expect in today’s market. A professional appraisal of collectibles, art, or antiques will also allow you to add these items to your home or renter’s insurance, so you can recoup the value in case of damage or theft.
For a more in-depth description of net worth, read this article:
Investopedia: What is Net Worth?
https://www.investopedia.com/terms/n/networth.asp
This week you will decide which method to try first to track your net worth and connect/track your primary checking and savings accounts. Over the next weeks/months you will find then connect/track all the following:
- Any other bank accounts (perhaps in your childhood hometown or college town)
- Investment accounts, for example traditional or ROTH IRAs
- Employer Retirement 401K, 403b, 457 accounts for current and previous jobs
- Pension value for current and previous jobs
- Life Insurance value
- Real estate equity (roughly estimate as Zillow Zestimate – Mortgage Amount)
- School Loan amounts
- Mortgage amounts,
- Car loan amounts,
- Credit Card balance unless paid in full each month
- Any other investments or debts
Treat this like a marathon. You do not need to find every account in one sitting. One WAMBC member found a forgotten “cash value pension” worth over $20,000 a year after starting to collect her financial information. You need a comprehensive list of your assets and debts, if only so your loved ones can find your assets should you get hit by a bus.
The following videos show how net worth tracking tools work. If you are concerned about hackers and security, you can track you information in a notebook or in an Excel spreadsheet. However, first honestly assess how frequently you check the balances of all your various accounts. Using a linked online tool would allow you to check for any transactions on all your accounts in literally ONE MINUTE. Checking regularly would allow you to catch and hopefully reverse any fraudulent transactions quickly.
There are many tools available. Two of the most popular free tools are Mint and Personal Capital, but you may find another tool that works for you.
Personal Capital vs MINT // What’s the Best FREE Budgeting App? (8 Minutes)
This Brittany Flammer video provides an inside look at the displays and functions available in Mint versus Personal Capital.
For yet more information, check out the article below:
InvestorJunkie – Personal Capital vs. Mint – Which Is Best for You?
https://investorjunkie.com/compare/mint-vs-personal-capital/
If you want to skip the research rabbit hole and just start right now, I have used both. For me, Mint was simpler and more beginner friendly. Mint also include a bunch of budgeting functions, so you could use it for all your financial management needs. I also appreciate when Mint sends me emails to alert me to suspicious transactions that deviate from my typical spending. On the downside, somehow a duplicate IRA account was created that I could not figure out how to delete, so I had to remember to subtract the duplicate IRA value from my net worth. On Personal Capital, account names can be customized which allows you to sort and organize accounts which was helpful when creating our wills. I also found many of the Personal Capital graphs useful and interesting.
Key Takeaways
According to the Investor Junkie article, Mint and Personal Capital both offer:
- Linking Financial Services
- Email Notifications
- Cash Flow Reporting
Mint performs better for:
- Budgeting
- Bill Alerts
- Security
Personal Capital performs better for:
- Synchronization
- Customer Service
- Investment Analysis
- Retirement Planning
DISCUSSION QUESTIONS
Would a net worth tracking tool make your life easier?
Do you know what your net worth is? Does finding out sound exciting or scary?
Are you concerned that hackers may be able to bypass the security and access your financial information?
How often do you review all of your various accounts?
<< Back to Week Three Summary << – – – – – >> Forward to Week 3 – Learning Module 4 >>