Keeping track of your finances can be overwhelming, especially if you’re trying to save up for a big expense, like buying a house or sending your kid to college. Fortunately, there are lots of helpful software and websites available to simplify the process of tracking your expenses and monitoring your net worth. Keeping tabs on where your money is going is one of the best ways to stay on top of your personal finance game.
If you want to know how much money you have and how much you’ll have in the future, you need a net worth plan. A net worth plan will also help you understand how different financial decisions could impact your ability to retire when and how you want. This five-step plan will give you all the tips and tricks you need — right now!
Step 1: Track your net worth with a spreadsheet
If you’ve never calculated your net worth before, start by creating a spreadsheet to keep track of your current financial situation. Net worth is calculated by adding up all your assets (like your retirement savings, home equity, and cash savings) and then subtracting all your liabilities (like your student loans, credit card debt, or mortgage).
Step 2: Know what’s driving your net worth
Your net worth is likely to go up and down over the years, but knowing what’s driving changes in your net worth will help you make smart decisions and stay on track.
Step 3: Create a financial plan
Once you know where you are financial, it’s time to create a financial plan for where you want to go. A financial plan can help you prioritize your financial goals, get on track with your savings, and make the smartest decisions about your money. If you want to increase your net worth, you’ll need to make changes to your current spending and saving habits.
Your financial plan will include your current income and expenses, as well as your long-term goals, like saving for retirement, buying a car, or paying off debt. You’ll also want to consider your savings options and investment goals. While you can use a spreadsheet to keep track of your net worth, a financial planning tool can help you create a more comprehensive plan for your money.
Step 4: Monitor your investments
Just like you need to keep track of your income and spending, it’s also important to keep an eye on your investments. Keeping track of your investments will help you understand how different investments are doing, as well as whether you’re meeting your investment goals. There are lots of different ways to track your investments, from handwritten notes to more sophisticated online tools.
If you’re interested in getting a handle on your investments, online investment tracking tools are a great option. These tools can help you track your investment performance, and synchronize your portfolio with your net worth spreadsheet to see how your investments are impacting your net worth. Some investment tracking tools also include tips and insights on which investment strategies are most promising and how you can maximize your returns.
Step 5: Celebrate and maintain your progress
Once you’ve created a net worth plan and started tracking your investments, you’ll be well on your way to improving your financial situation. But it’s important not to get complacent and stop tracking your net worth. If you want to maintain your financial progress, you’ve got to keep tabs on your net worth.
Your financial situation will change over time, so it’s important to periodically reevaluate your net worth plan. If you want to stay on track, you’ll need to adjust your net worth plan as your financial situation changes. Keeping tabs on your net worth will help you understand if your financial decisions are helping or hurting your ability to achieve your financial goals.