When I used to think about tracking my net worth, I always assumed it was something older people do and I didn’t need to worry about it for the time being.
I signed up for Mint.com a few years ago to start tracking my expenses, and it felt pretty disheartening to scroll down and see my negative net worth, so I simply just ignored it.
While budgeting is good for anyone who wants to improve how they manage their finances, I think tracking your net worth should be just as important, especially for millennials.
Your net worth is your total assets minus your liabilities.
Your net worth reflects what you own and how much money you are worth (which is what’s important) versus how much money you earn.
Here are a few reasons why millennials should be tracking their net worth regularly, even if they are negative.
You Need to Manage and Grow Your Assets
Tracking your net worth is the best way to review your assets so you can grow them. While younger people are delaying homeownership more these days, you may still have other assets like your 401(k), emergency fund, other investments, or a paid off car that you own.
It’s important to know what your assets are and how much they are valued at because it can help you when setting financial goals. If you’d like to retire some day, your net worth will play a huge role in making that goal a reality. The sooner you calculate and track your net worth, the more knowledgeable and aware you’ll be of your financial situation.
If you’ve saved up money or invested in your retirement or the market, you owe it to yourself to keep an eye on those financial contributions and track their growth over time. Simply keeping a spreadsheet and checking in on your net worth once a month doesn’t require much effort or time at all.
Tracking your net worth can also come in handy around tax time when you need to reference exact figures and file your taxes in a reasonable amount of time.
Motivation to Pay Off Debt and Grow Wealth
If you haven’t invested much yet and still have a negative net worth like me, you should still track it because it can add extra motivation to get your net worth to a positive number.
Paying off debt makes me feel empowered and I love seeing my balances go down along with seeing my net worth go up.
Having less debt means less liability if anything were to ever go wrong. Since student loans typically can’t be discharged in bankruptcy or even after death, it’s imperative for me to pay them off, and tracking my net worth just adds to my level of motivation.
Whenever I add to my emergency fund and put a little extra toward my debt, my net worth slowly starts getting closer to $0. Once I’m debt free, I’ll start working on growing my assets more.Tracking your net worth might seem pointless when it's negative, but it's not. Here's why Click To Tweet
Okay so tracking your net worth might not be as fun as spying on the net worth of your favorite celebrities on CelebrityNetworth.com, but it’s still encourages a great feeling.
Tracking your net worth and seeing it improve month after month is much more fulfilling than receiving a large paycheck or bonus and spending the money on bills or other expenses.
I believe a lot of people never feel truly fulfilled with work and get caught up in the rat race year after year because they are continuously trading their time for money and chasing a paycheck that they usually blow on expenses and splurges week after week.
That ‘high’ you feel on payday usually fades away. But when you track your net worth and put money aside to save and invest, you are holding onto your money and growing it, which is pretty fun in my opinion.
Budgets Show Where You’re At, Your Net Worth Shows Where You’re Going
I’m a big fan of budgeting, but I know that that is only half of my financial picture. I once read a quote about what rich people do as opposed to what broke people do, and it basically said that rich people track their net worth while broke people track their income.
This is so true, because at the end of the day, it doesn’t matter how much you earn if you are not using the income to add value to your life and if you are still struggling financially.
Tracking your net worth is all about what you keep and how it grows over time – not how much you have right now or how much you spend trying to keep up with the Joneses. Once millennials understand that, they’ll be so much closer to obtaining wealth and actually being able to enjoy it in their lifetime.
Tracking your net worth helps you adopt a better mindset that can lead to wealth, financial independence, or any other financial or life goal you have on your radar.
Do you track your net worth? How does it help you stay motivated or stick to your financial goals?