Net Worth!

As we start a new year it is import to get a sense of ones financial health.  The best way of doing this it to track ones net worth and monthly spending.  To do this first calculate your total debt load.  This is the sum total of all loans you’ve taken out and money you owe to people.  Next calculate the value of all of your stuff.  This is harder than it sounds because most of our stuff is difficult to fix a value to.  Something like a home is easy. Go to Zillow or a similar real-estate website and there you will find a reasonable value for your home.  Other things are more complex.  Cars, collectibles, furniture and other items may have a lot of values for us, but may be hard to place a fair market value on.  For simplicity I only add items I can sell (on eBay or craigslist) for at  least $500 to my net worth list, and get a price estimate by checking what similar items are valued at by using a reputable source like Kelly Blue Book for cars.  Once I have the value of all the things I own I subtract my debt load and there is my net worth

To track spending is just as simple.  If you use credit/checks/and debit cards for all or most of your purchases then you just add up the total value of expense in a given month.  What I also do is itemize the spending so I get a sense of how much I spend on groceries, dining out, entertainment, housing, etc… each month.

Once you’ve done all of this you know how much you are worth and how much you spend each month.  If all is going well you are worth more than you owe and you spend less than you make in a month.  You can also develop a plan to pay off your debts and allocate money for investment.