I assume that you are reading this because you want to increase your income and net worth. Mr. Obvious just messaged me to let me know that if you want to improve something, you first must be able to measure it. This applies to both income and net worth.
For your income, I hope that you have already a budget. If not, you must create one. Your budget can act as your default personal income statement, aka personal P & L (profit and loss) statement. For this article, I am going to focus on your personal balance statement. Your balance statement will consist of a list your assets and your liabilities. The difference between the two is your net worth. Hopefully, your assets are greater than your liabilities providing you with a positive net worth. If this is not the case, you’re going to have to work hard, using your budget, to eliminate some debt. Either way, you’re going to want to track this net worth over time.
Personal Assets
Your list of assets (using the term normally as society does) will typically include the balances of your checking and savings accounts, the fair market value of any real estate that you own, the balances on your retirement accounts, and balances on other investment accounts. You should also list other assets that may not be immediately recognized as assets. These can include vehicles, jewelry, cash, collections, and notes owed to you by others.
Personal Liabilities
Your list of liabilities will include all loans that you owe including mortgages, personal loans, vehicle, RV and boat loans, and, of course, credit card debt. It might also include lease and rent-to-own contracts, lines of credit or other personal debts.
Spreadsheet
I recommend that you track these values in a well-constructed spreadsheet. The calculated difference between the sum of your assets and the sum of your liabilities is your net worth. If the exercise to collect these individual asset and liability values was difficult, you’re going to want to get more organized. These are the variables you will be adjusting to increase your net worth. You will need to be able to update these at least monthly. I update my spreadsheets weekly. I have a spreadsheet for my personal balance statement, for the balance statements for each of my entities and one for the summation of all of them. Yep, I count my money every week. I have made the monitoring of my new worth a high priority consistent with my goals.
Graph Your Net Worth
Additionally, I graph my net worth over time. After several years of monitoring, I have a graph that reflects my focused efforts that motivates me even further to continue to take actions. Some people react negatively to his practice. If you are hung up any negative perspectives on wealth, read no further. This is not for you. The fact is one must monitor wealth to increase wealth.
No one questions that if you want to lose weight, it makes sense to step on the scale every morning. If you want to lower your 10k race time, you probably own a watch. When I competed in powerlifting, I tracked the weight lifted during my workouts. Count your money, track it over time and add Salary Seeds to keep your net worth increasing every month!
