Monday, May 16, 2011

Net Worth Revisited

For some reason Blogger wasn't working Thursday and just realized this never posted, so here goes...

Well, it's been a month since I first started using my Net Worth Spreadsheet and am excited that it went up 2%.  It really is useful to see what accounts are going up/down, what expenses are going up/down and how you are doing now compared with the prior month.  It is definitely good info and it only took 15 minutes and that was because I forgot one account login and had to ask the wifey for another one.  Next month it should take 10 minutes or less. 

I also decided that I'm only going to modify the estimated value of our home and vehicles once a year on 12/31 of each year.  I decided checking the value monthly really isn't necessary and not all that accurate anyway.  At the end of the year I might take a bigger hit if the housing market goes up or down a bunch and also since vehicle values decrease year to year, but if I do it each year in December at least I know that month will be different for comparison sake. 

I'd highly recommend keeping track of your Net Worth as well.  It's not as granular as a monthly budget, but it's also not as cumbersome and time consuming.  It's just a very quick snapshot of the big picture and as long as your graph is upward sloping, life is good!

Obviously, the higher the slope the better, but every little bit helps.  Also, if things are heading in the wrong direction in a particular month you can quickly see that maybe one of your credit card bills went up and perhaps it was due to a particular large purchase, such as a vacation or a new semester of classes.  If a particular 401k or other investment account went down a bunch and your Net Worth was negative from month to month, assuming the overall stock market was down during that same period, that's to be expected.  But if that's not the case, it could prompt you to take a closer look at a particular account and investigate further.

I think it's definitely a useful exercise and the Spreadsheet that I linked to is worthwhile to utilize.  Like I mentioned in a previous post, if you're starting out mid-year, it will put a couple of errors on the main summary sheet, but really all you care about is the month to month difference $ wise and % wise and those values will be correct as you input more data.  In addition, the graph tab will begin to take shape as you add data as well.  Did you start to keep track of your Net Worth?  Things looking good?  Any tips/tricks that worked well for you?  Let me know if you have any questions


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