You’ve probably heard it before: 

“Net worth is the best way to measure your wealth!” 

“Focus on growing your net worth!” 

But what these kinds of quotable clips always fail to mention is…. 

What exactly is net worth?

How can I accurately measure my net worth? 

What are the real reasons net worth matters?

And do I always have to spend hours and hours tracking net worth every month — or is there a better way? 

In this article we go beyond the quotable blurbs and dive deep into net worth: What it is, how to measure and track it, and why it all matters.

What Does Net Worth Mean and How Can I Calculate It?

Net worth is a single number that shows the value of everything you own, less everything you owe. 

In other words, it’s the sum of the value of your assets minus the value of your liabilities. 

What are assets? Assets include pretty much anything you own or anything in which you’ve invested that generate income. That could mean cash; homes; vintage artwork that’s been passed down through your family; traditional investments like stocks and bonds; and even alternative investments such as domain names, cryptocurrency, and plenty more

And liabilities? Liabilities are your debts. Typically, some of your debts will be generated by your assets — like your mortgage or car note). Other debts may be generated by credit card usage, student loans, and so on.

It’s important to note that regular expenditures — like your monthly phone bill, groceries, or one-off purchases at Target — are simply expenses, not liabilities. 

Now, let’s find your net worth. 

The first step to calculating your net worth is adding up the value of your assets. Realize that it can take time to remember all of the assets in which you’ve invested over the years, so be patient with yourself in this phase. 

Once you feel you have an accurate accounting of your assets, it’s time to add up your liabilities. It can be similarly difficult to remember every single debt. A tactic that may help is keeping an eye on your automatic withdrawals to track down all the debts you’re paying down every month. 

Finally, it’s time to calculate your net worth!

Surprisingly, this is the easiest part: 

To find your net worth number, subtract the total of your liabilities from the total of your assets. 

Pretty achievable, right? 

Then it’s time to talk about why it matters.

Key Reasons Tracking Net Worth Matters

Knowing your net worth is interesting and all, but why does it actually matter

As we’re about to explore, there are plenty of reasons that understanding and tracking net worth is actually quite important.

Net Worth Is an Indicator of Total Financial Health

Just like blood pressure and cholesterol numbers can help indicate your physical health, net worth gives you a number by which you can judge your financial health. 

The median net worth for an American family is $52,700. For individuals, that number looks more like $11,100 up until the age 35, $124,200 when they’re between 45 and 54 years old, and $124,200 at 75 or older. 

And while these numbers can provide a helpful benchmark initially, what’s really important is how your net worth compares to itself over time.

Income fluctuates pretty regularly and doesn’t take into account the debts and expenses you’re leveraging against it. 

And then there’s debt — which doesn’t tell the whole story when it’s not compared to the value it produces. Sure $100,000 in liabilities may sound extreme to most of us — but is it so bad when it helps contribute to $1,000,000 in assets?

That’s what makes net worth so valuable — it’s a single, easily-calculable metric for seeing how your choices balance each other and play out in your financial life over time.

A Clear View of Net Worth Makes for More Accurate Investments and Goal-Setting

There’s no “right answer” when it comes to the net worth numbers you’re supposed to hit before checking off major life goals. 

However, when it comes to purchasing a home, the expert behind Financial Samurai recommends trying to keep real estate to 35% to 50% of your net worth

Knowing this, you can calculate how much of your net worth any home would account for and make an informed decision on whether it’s time to make the purchase or keep saving up. 

Benchmarks like this one as well as ones you set on your own or with the help of a financial advisor will help you make informed decisions when it comes to what you should invest in — and what you should set aside as a future goal if you’re not quite in the right place to complete a purchase or make an investment.

Net Worth Uncovers the Impact of Your Less-Tangible Investments 

Net worth is extremely useful for making the intangible more visible. 

It can be especially hard to understand the impact of your investments if, like most of us, you don’t have the time or desire to interact with all of them every single day. This is even more true if you’re diversified across many different asset types — which is key to a healthy portfolio

Looking at changes in your net worth instead shows, at a glance, how your investments are performing on the whole and how important even the smaller or more obscure ones are to your overall wealth. That way you can tell when you’ve made wise investments as well as when it’s time for you to explore rebalancing your portfolio to spur new growth.

The Best Way to Grow Net Worth Is to Track Net Worth

Most of us have heard the famous quote that’s often attributed to management consultant Peter Drucker: “If you can’t measure it, you can’t improve it.” 

What can we infer from his advice? That what you can measure you can find a way to improve.  

And there are few places where this is more true than it is in the financial space.  

Tracking your net worth over time shows you how your various decisions impact its growth. This enables you to adjust your decisions to keep it moving upward. 

Why should you want to grow your net worth?

Primarily because wealth is the fuel for your life goals.

Want to achieve those life goals?

Then keep reading to learn what tracking net worth is all about.  

A Step-by-Step Guide to Tracking Net Worth

In this section we’ll provide a step-by-step guide to tracking net worth using several different methods — from traditional to modern.

1. Create a List of Your Assets and Liabilities

Like we described above, calculating net worth is all about having an accounting of your assets, your liabilities, and the difference between them.

This may be pretty arduous the first time around, kind of like gathering all the resources it takes to apply for a mortgage or other loan, so be sure to compile all your information using a singular platform with which you’re comfortable working. 

And that point brings us to our next step — choosing a tracking method that makes this whole process a little more comfortable and quick. 

2. Choose Your Net Worth Tracking Method 

There are a few options from which you can choose when tracking net worth. 

First is the age-old spreadsheet.

Tedious and traditional, spreadsheets require you to manually enter all your asset and liability information the first time around — and then manually update them again every time you go in to find your most up-to-date net worth numbers.

However, this solution may be a fit for people who really prioritize customization and control when tracking net worth — and perhaps also want an offline-friendly, hard copy of their net worth tracking method. 

A similar solution is a spreadsheet that someone else has already tricked out with a template and automations that help make the process of calculating and tracking net worth a lot smoother after the initial data entry (here’s an example from the Wise Woman Wallet blog). 

Finally there’s a modern, software-based solution that makes the process of calculating and tracking net worth practically automatic: Kubera.

Kubera is the only all-in-one wealth tracker that enables you to sync your entire portfolio to a singular dashboard from which you can monitor and manage your investments and net worth. 

3. Add Your Assets and Liabilities to Your Net Worth Tracker

Here’s the biggest argument for using a software-based tool for tracking net worth: Automation. 

With a spreadsheet, you’re stuck doing this step every single time you want to see your latest net worth number. 

The more assets, liabilities, and often you want a read on your net worth; the more time you’re going to spend on manual processes when using a spreadsheet-based solution. 

However, with Kubera, if you own it — we make it easy to track and manage it.

In just a few clicks, you can connect different banking, traditional investment, and even crypto accounts to your singular Kubera dashboard to make sure all associated assets and debts are accounted for when it comes to net worth.

(Check out all the institutions we support here.)

Kubera employs automations that keep the value of your accounts up to date — no matter if they’re full of foreign, fiat, or digital currency — so you can always get a view of your net worth in real-time. 

For more automation, Kubera users can add our individual crypto and stock tickers to keep an eye on the market and make smart investment decisions.

For assets without accounts? 

For homes, vehicles, or web domains specifically, we’ve integrated with leading asset experts (such as Zillow in the U.S.) so you can always see the true value of your assets in your Kubera dashboard.

And for those assets and liabilities that we can’t (currently) help you calculate the value of, such as your collection of rare baseball cards, you can simply enter the details and values of each with our highly-customizable yet easy-to-use fields. 

add all your assets

4. Continuously Track Your Net Worth Over Time 

Continuously tracking net worth is necessary to understand where you are on the path to your goals — and whether it’s time to recalibrate any of your investments. 

Even when you know how important it is, it can be hard to stay motivated to keep an eye on your net worth when every time you go to check it, it requires an hour or more of manually updating assets and liabilities. 

Kubera doesn’t just offer automation that makes continuous tracking easy, it offers charts that make it beautiful.

Continuously Track Your Net Worth Over Time

For our visual learners, we built Kubera’s custom charts feature so you can keep an eye on asset allocation, you can watch investment performance, and most important of all you can see how your net worth ramps up over time.  

Begin Tracking Net Worth in Minutes with Kubera 

Just like we do everything else, at Kubera we make it simple for you to get started with (easily) tracking net worth! 

You can sign up for a monthly subscription today. 

You could choose to save a little money by purchasing an affordable yearly membership

Or, if you’re a financial professional or want to use Kubera with the help of your financial professional, reach out to our team at hello@kubera.com to learn about Kubera’s white-labeling solution.