If you could track only one number about your money, it should be your net worth. It is simple: everything you own minus everything you owe. Watched over months and years, it tells you whether all your other decisions are adding up.
What counts as an asset
- Cash in checking and savings accounts
- Investments: stocks, ETFs, funds, bonds, term deposits, crypto and anything else in your portfolios
- Retirement accounts
- Your home, at a realistic market value
- Vehicles and valuables, at what you could actually sell them for
What counts as a liability
- Your mortgage balance
- Car loans and student loans
- Credit card balances you carry from month to month
- Personal loans and money you owe to family
Group them in a way that makes sense to you. Categories are only useful if they match how you think about your money.
Reading it over time
A single net worth number says little on its own. The trend is what matters. A steady climb means you are saving and your assets are growing faster than your debts. A dip after a big purchase is normal. A slow, persistent decline is a signal worth investigating.
Do not compare your net worth with anyone else. Compare it with your own number from six months ago.
Two common mistakes
The first is valuing things at what you paid instead of what they are worth today, especially cars. The second is ignoring small debts because they feel temporary. A credit card at 23% interest is never small for long.
Update your numbers once a month, and your net worth becomes the clearest scorecard you have.
