Tracking and monitoring your net worth is an important part of managing your personal finances. Your net worth is simply defined as the difference between your total assets (what you own) and your total liabilities (what you owe). By monitoring your net worth over time, you can get a better understanding of your overall financial health and make informed decisions about your finances.
Let’s look at some examples below:
Tracking your financial progress: Your net worth is a measure of your financial health and reflects how much your assets are worth in relation to your liabilities. By tracking your net worth over time, you can see if you are making progress towards your financial goals, such as building wealth or paying down debt.
Planning for the future: Your net worth can give you an idea of how much you can afford to save or invest for the future. It can also help you determine if you need to make adjustments to your spending or savings habits to reach your long-term financial goals.
Identifying areas for improvement: If your net worth is not where you want it to be, it can help you identify areas where you can improve your finances. For example, you may need to focus on paying down debt or increasing your income to increase your net worth.
Making informed financial decisions: Knowing your net worth can help you make informed decisions about major financial purchases or investments. It can also help you determine how much risk you can afford to take on when investing.