Why Net Worth Is the Most Important Number to Track (And How to Do It Right)
Forget complicated budgets that make you feel guilty for buying coffee or tell you that you have over spent when you make an extra mortgage payment. There's one number that tells the real story of your financial health: your net worth. I've been tracking this number for over 20 years, and it's the single most powerful tool for building wealth I've ever used.
What Is Net Worth, Really?
Net worth is beautifully simple: Assets minus Liabilities
Your Assets include:
Bank account balances
Investment accounts (401k, IRA, brokerage accounts)
Real estate you own
Valuable items you could sell (car, jewelry, collectibles)
Your Liabilities include:
Mortgage balance
Student loans
Credit card balances
Any other debts you owe
Here's the key: When valuing your assets, use what you could realistically sell them for today, not what you paid or what they cost new. That secondhand West Elm table I bought for $400? If I could sell it today for $400, that's its asset value—not the original $800 retail price.
Why Net Worth Beats Budgeting
Picture this scenario: You contribute an extra $1,000 to your investment account this month.
What your budget tells you: "Oh no! You spent $1,000 more this month!" This creates anxiety and makes you feel like you failed financially.
What your net worth tells you: Your investment account increased by $1,000 while your checking account decreased by $1,000. Your overall wealth stayed the same today, but you moved money from a low-earning account to a wealth-building one. This is progress!
Net worth gives you the complete picture, celebrating moves that actually improve your financial position.
How to Track Net Worth Like a Pro
Choose Your Tracking Method
Option 1: Financial Apps
Monarch (our favorite at The Pledgettes)
These apps automatically pull account balances and update your net worth.
Option 2: Simple Spreadsheet Create a basic Excel or Google Sheets with columns for:
Asset/Liability name
Current balance
Date updated
Total net worth calculation at the bottom
The simpler, the better. Don't get bogged down in complexity—just start tracking.
Stay Consistent with Valuations
This is crucial: Use the same source for asset values every time you update.
Home value: Pick one source (Redfin, Zillow, etc.) and stick with it
Car value: Use NADA or KBB consistently
Investment accounts: These update automatically in most apps
Consistency matters more than perfection. You want to track trends, not get the exact-to-the-penny value.
Update Monthly
I update my net worth every month, and it makes my heart sing when others do the same. Monthly tracking lets you:
Celebrate progress (investment growth, debt paydown)
Spot trends
Make more confident financial decisions
Stay motivated on your wealth-building journey
What Net Worth Reveals About Your Money
The Big Picture View
Instead of getting lost in whether you spent too much on groceries, net worth shows:
Are you building wealth over time?
Is your debt-to-asset ratio improving?
Which financial strategies are actually working?
Progress Patterns
Over months and years, you'll see patterns:
How market fluctuations affect your investments
The impact of extra mortgage payments
Whether your spending habits support wealth building
The compound effect of consistent investing
Motivation Fuel
There's something magical about watching your net worth climb month after month. It transforms abstract financial concepts into concrete progress you can see and celebrate.
Getting Started: Your Net Worth Action Plan
Week 1: Calculate Your Baseline
List all assets and their current values
List all debts and their current balances
Calculate your starting net worth
Don't judge the number—everyone starts somewhere
Week 2: Choose Your Tracking Tool
Decide between an app or spreadsheet
Set up your preferred system
Input your baseline numbers
Week 3: Set Your Update Schedule
Pick a consistent day each month (I like the last day)
Add a calendar reminder
Commit to this practice for at least six months
Ongoing: Celebrate the Journey
Your net worth will fluctuate—markets go up and down, home values change, life happens. Focus on the long-term trend, not month-to-month variations.
When I started tracking 20+ years ago, I had maybe $5,000-$10,000 in net worth. It was a tiny positive number, but it was mine, and watching it grow became one of my favorite monthly rituals.
Beyond the Numbers
Net worth tracking isn't just about the math—it's about developing a wealth-building mindset. You start making decisions through the lens of "How does this impact my net worth?" rather than just "Can I afford this monthly payment?"
This shift in thinking is powerful. You begin to see your financial life as an interconnected system rather than a series of isolated transactions.
Your Net Worth Commitment
Building wealth happens when you combine the fiscal side of money (like tracking net worth) with the behavioral side (like developing healthy money mindsets). Net worth tracking gives you the data to make informed decisions and the motivation to keep building.
What's your commitment? Will you calculate your baseline net worth this week? Choose a tracking system? Set up a monthly update routine?
Remember: You don't need to be perfect at this—you just need to start. Your future wealthy self will thank you for beginning to track this powerful number today.
