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When I was younger and heard people discussing net worth, I thought it was only for the wealthy. After all, reports about celebrities’ net worth like Oprah or Warren Buffett don’t matter to a regular Joe. Or so I thought.
How naïve I was!
Every person should be concerned with their net worth as it is a firm indication of where you stand financially. Knowing how much you own shows you if you’re falling behind on your financial goals. And it can tell you your true level of debt and how much you have ready for the future.
What is your net worth? If you don’t know, here’s how you can figure out your net worth and popular net worth tracker apps to use.
What Is Net Worth?
Your net worth is your total wealth, taking into account all of your assets and liabilities.
Wondering how to figure out your net worth? It’s a simple equation. Add up the value of all your assets, subtract the amounts of your debts and liabilities, and the result is your net worth.
Student loans, car loans, credit card debt, high mortgages, and medical bills all hurt your net worth. Owe too much, and your net worth can go negative. Let’s look at some examples.
James also took out a loan to purchase his car and owes $15,000. But he’s paid his student loans down and owes only $20,000. And James pays his credit cards off each month, so they do not carry debt. Like John, James rents. But he’s invested $35,000 in his company’s 401(k), as well as shares of stock that are valued at $75,000. James’ assets equal $110,000 and his debts total $35,000. So James’ net worth is $75,000.
If John or James owned a home, the mortgage would be a liability, but the home’s value would be an asset. Basically, whatever is left over if they sold their home and paid off the mortgage would be part of their net worth.
Why Should You Track Your Net Worth?
There is a big difference between following a budget and keeping track of your net worth. While a budget helps you follow a path to reach your goals, your net worth shows where you are in terms of those goals. Your net worth tells you the real financial picture. The higher your net worth, the more money you have available for your retirement. If your net worth isn’t in line with your goals, it’s a sign that you’ll have to keep working on getting your finances in order.
How Do You Track Your Net Worth?
To track your net worth, you’ll need to know all of your financials, just as if you were applying for a mortgage. Record all of your assets, from cash to investments, collectibles to jewelry to real estate, and any businesses you may own. Then record all of your liabilities, such as credit card debt, loans, and mortgages.
Understanding your net worth isn’t a one-and-done practice. Watching your finances to see the results — whether positive or negative — will help you focus. As will a budget. If you don’t have a budget, now is the time to begin.
Find out more>> How to Build a Budget.
Popular Net Worth Tracker Apps
If going through all of your assets and liabilities every month (let alone budgeting) makes you shudder, some tools can make it easier by automating the process. Try these apps to track your net worth.
1. Personal Capital
Link your accounts to this powerful online platform, and Personal Capital will give you a complete view of your net worth. Simply link your credit cards, mortgage, loans, and your investing, retirement, and bank accounts. Then Personal Capital’s net worth tracker does the rest.
This tool allows you to consolidate all of your accounts in one place so you can measure your progress over time. Seeing firsthand how your accounts look — whether on your desktop or mobile device — can help you pivot your budget to focus on your goals and improve your net worth.
Of course, with all of your accounts linked, Personal Capital can also organize budgets for you, provide a retirement plan, and monitor your cash flow.
The best thing about Personal Capital is that it offers plenty of services and value with its free membership. (You can upgrade for even more features, but its free tools are pretty impressive)
Another budgeting platform with free tools is PocketSmith. While the free tools are okay, they do not automatically connect your accounts in one place. Instead, you’ll need to opt for the Premium version to get the automated features. PocketSmith costs $9.95 monthly or $7.50 per month if you pay in full for the year. The Premium version provides automatic feeds and creates a dashboard that highlights your net worth automatically.
As a budgeting platform, PocketSmith lets you create daily, weekly and monthly budgets. And you can create cash projections, watch your cash flow, and schedule bills.
Similarly, YNAB provides budgeting tools on its platform. But then it goes above and beyond by teaching you how to manage your money. Standing for “You Need a Budget,” YNAB offers tools for desktop and smartphones, as well as Apple Watch and Alexa. YNAB teaches you how to prioritize and plan so you can get to your goals faster.
YNAB’s program focuses on four rules:
- Give every dollar a job.
- Embrace your true expenses.
- Roll with the punches.
- Age your money.
This is the platform for you if you’re just starting out and eager to learn how to get yourself on the right track. The program comes with a free 34-day trial, and then you can opt to pay $11.99 monthly or save with an annual membership of $84, each of which can be canceled at any time.
4. Facet Wealth
Facet Wealth is not a budgeting platform. Instead, this online provider pairs you with a dedicated Certified Financial Planner™ (CFP®) who works with you on your financial planning and goals. Then your CFP will help you improve your net worth and offer guidance on how to do it.
This personal service, however, does come with high fees. You can expect to pay an annual fee ranging between $1,200 and $6,000 a year. This fee gives you comprehensive financial planning and a pathway to your financial freedom.
You’ll meet with your CFP on a video conference to discuss retirement planning, asset management, insurance planning, retirement income, estate planning, and more.
Apps That Help You Grow Your Wealth
Once you know your net worth and are budgeting, you can work on improving your net worth. There are many apps and platforms that make this easier. The following are great for new investors who don’t have a ton to invest but want to learn and slowly grow their finances. Try these apps to grow your net worth.
One of the easiest investing platforms is Betterment, which is available as a smartphone app or on desktop. This Robo advisor is an automated financial advisor that makes investment choices for you based on your personal financial goals. The program determines your risk tolerance from your answers to the program’s introductory questions. Then Betterment recommends a portfolio of exchange-traded funds (ETFs).
Betterment charges a fee to manage your investments. For anything under $100,000, you will be charged annually 0.25% of your assets under management. And if you have over $100,000, you’ll be charged 0.40% and get extra perks like getting unlimited access to their CFPs.
2. Stash Invest
If you want control over what you are investing in, Stash allows you to choose specific stocks or their preselected portfolios. And you can start with as little as $1 and invest in fractional shares. (This means your funds are combined with others’ to buy the full share, and you get a percentage of returns based on the amount of your investment.) You can also get access to a bank account, as well as budgeting and savings tools.
There are three subscription plans — $1, $3, or $9 per month — that aim for long-term investing by teaching you how to invest, setting you up with a personal brokerage account, providing traditional or Roth IRAs, offering personalized advice, and more.
Acorns takes your leftover change and automatically invests that amount in a retirement account. It works by linking to your credit cards and/or checking account. Then it rounds each transaction up to the nearest whole dollar and invests the difference.
Like Stash, there are three low-cost subscription plans: $1, $3, or $5 per month. Every level invests your spare change. But the various levels allow you to invest in a retirement account, set up an investment account for your kids, or get access to a checking account.
There Are Many Ways to Keep Track of Your Net Worth
It’s important to know your net worth and have a firm grasp of your finances. Use a net worth tracking app to make it easier for you to visualize and stay on course to reach your goals. Understanding your net worth will help set you on the path to having greater net worth. While you may not reach Oprah-level net worth, you can get to a place where you can enjoy a comfortable retirement.
Written by Lissa Poirot.
View the original article at here.