The Holy Grail of Personal Finance Numbers: Your Net Worth
The world of personal finance comes with lots of numbers and terms, all of which are important such as: credit, outstanding debt, income, cash flow, assets, liabilities, budget and many more.
However, in my opinion your net worth is the holy grail of all personal finance numbers. Why you ask? Because it is the single number that gives you a view of where you are in relationship to being able to support yourself off of your investments alone. It’s the big picture.
Image Credit: Erich Ferdinand on Flickr
A lot of personal finance bloggers start blogging as a means to hold themselves accountable to their financial goals and share their successes and failures along the way. Many of them provide regular updates on their progress, which can be helpful to readers who are trying to figure out their own path to financial independence (check out the blogs I follow on the Awesome Blogs page for some good examples).
When I started Escaping Dodge, I had long since killed my debt, saved and built techniques and tools to build wealth. My reason for blogging was to build a community of people who were interested in doing the same and sharing their stories. A place where we can all learn from each other. I didn’t feel a need to unveil my personal finances beyond a single net worth number found on the About Me page. But I’ve changed my mind…
- I feel so strongly about the importance of your personal net worth number that it bears a lot of attention.
- There are many ways you can calculate your net worth so I want you to understand my approach and rationale. The best way for me to demonstrate my method is to show you how I do it using my personal information.
- I’m not yet what I would call “financially independent.” By opening my own kimono, so to speak, you can see how I progress toward my goals.
The post following this one will provide detailed steps showing how I calculate my net worth. Then, beginning March 1, 2014 I’ll post my net worth and update it periodically.
While You’re Waiting…
In the meantime, here are some interesting posts you might want to read to learn more about net worth, how people calculate it and what number is the target number to reach financial independence. Happy reading!
- Why Net Worth is Misleading via MomAndDadMoney.com. Matt makes some really good points about how your net worth figure reflects a point-in-time and can fluctuate based on stock prices, home values, etc. He makes some other really great points in the article, but I’ll let you read it to get those nuggets!
- What do You Mean You Don’t Know Your Net Worth via Bucking-The-Trend.com. I love Buck’s reasoning for why you should track your net worth: “What gets measured gets managed.”
- Net Worth and the 4% Rule via CashCowCouple.com. Jacob wrote a great post on net worth, but the point I love is that he reminds us that our “net worth” has nothing to do with our “worth as a human being.” So true.
- The Ultimate List of Blogger Net Worth via RockstarFinance.com. J. Money posts a comprehensive list of bloggers’ net worth along with links to their blogs. He also gives some great commentary on how these bloggers come up with their numbers.
Do You Track Your Net Worth?
I’d love to hear your opinion of the importance of the net worth figure, why you feel the way you do and how you calculate it. Your thoughts will help others on their way to financial independence so don’t be shy and leave a comment below!
- Part I – Does Your Spending Support Your Values
- Part II – Does Your Spending Support Your Values
- Reduce Financial Emergencies With One Simple Strategy
- Part I – Why You Should Have a 10-year Plan
- Part II – Setting 10-year Plan Goals
- Part III – Charting Your 10-year Plan Progress
- Saver Vs Spender — Which One Are You?