bluntmoney.com

Many pfbloggers calculate (and sometimes post) their net worth each month. Have you ever wondered why? It’s not just because they want something to write about. There are several good reasons to figure your net worth on a regular basis.

It provides a snapshot. Calculating your net worth provides a financial snapshot for you, allowing you to see areas that you could improve on, along with areas where you’re doing particularly well. You may realize that your assets are heavy in one area (your house, for example) but light in another (retirement funds). Maybe you’ll decide to increase your retirement contributions. You might notice that you have a lot of liabilities (credit card debt, car loans, etc) and decide to focus on reducing those. But before you can make any lasting changes in your financial picture, you have to know what that picture IS.

Trends appear. When you calculate your net worth regularly (whether it’s once a month or once a quarter) you begin to notice trends. (Especially if you keep track of your net worth in writing.) You’ll be able to notice your assets increasing and your liabilities decreasing. (Or vice versa.) You may notice that a particular investment is consistently losing value while others are increasing in value. If so, this may become a reminder that it may be time to adjust that investment.

It provides a basis for comparison. You can compare your net worth with various calculators that tell you where you “should” be based on your age and circumstance. You can then use this information to decide if you’re where you’d like to be financially speaking, and adjust accordingly.

Focus. For me, figuring my net worth (along with looking at my spending plan regularly) helps me to focus on my long term goals. The more regularly I think about something and clarify it in my mind, the greater my chances are of meeting my goals.