“I am worth more dead than alive.”
“I will work until I die.”
These are common refrains amongst most people.
I used to respond with “Do you save money?” or worse, “How much do you make?”
I have learned not to respond with those questions. Most people are emotional about money and finances. These questions put them on the defensive. Now I ask them “How do you invest your money?”
This is a much more palatable question for all levels of savers.
At the heart of this question is your net worth.
I only learned this term 8 years ago, but it now guides most of our financial decisions. We still splurge from time to time, but haven’t bought the margarita machine just yet. Tracking our net worth has helped my husband and I continue to save and invest. We calculate our net worth at the very minimum, twice a year. This allows us to see how much our investments have grown and evaluate if we need to save more. Most of all, it keeps us on our toes.
When we were first married our goal was to be worth $100,000.00. That may seem like very little money. To others it may seem like a ton. For us, it was a lot and the start of a shifting goal. We told ourselves, if we got to the $100k mark, we would celebrate with an expensive bottle of champagne. When we finally got to that milestone, we proudly went to purchase the champagne. Except, after working really hard to get there, we couldn’t bear to spend a lot of money, so we settled on a $5 bottle of J. Roget. Fancy right?
Since that very first celebration, we have hit more milestones and goals. We have also celebrated with a few more fancy bottles of $5 J. Roget. With every goal we hit, we make an even bigger goal. (Now it is early retirement, even with 4 kids).
If you are like me 8 years ago, net worth is a foreign concept. To calculate our net worth, we use an Excel spreadsheet. This spreadsheet has the following categories:
- Equity of our homes- Fair market value minus the outstanding loan balance
- Savings in the bank
- Investments in the stock market
- 401k and Roth IRA
We know that some people like to add in the value of their belongings, calling them assets. We do not do this, because we have no intention of selling the car, watch, or family heirloom and cannot access the equity in the “asset” without selling them. Our investments in the stock market and retirement can fluctuate. But because we are in these markets for the long run, we try not to stress over these fluctuations too much.
By tracking our net worth we were able to finally gain momentum. The important thing to note here is that, once the momentum was created, the easier it was to increase our net worth. The hardest thing though, was to get it started in the first place and keep with it when the numbers barely seemed to move.
If your net worth is negative, it’s not too late to get it moving toward the positives. Set a goal. Create a budget. Track your expenses. Start paying yourself first. You do not need to enroll in a fancy course to do this. All you need is self discipline. Is this always easy? No. Will you want to give up? At times, yes. But at those times, log into your computer and start tracking your net worth. When you see it going up, even if it’s by just a little, you will be encouraged. Do you have to sacrifice everything? No. We definitely do not live without. We still get tipsy on our champagne. It’s just getting used to drinking that $5 bottle over that $25, $50, or $100 bottle. Trust me, after the first bottle it all tastes the same anyways!