Tracking: The first thing you MUST do

Tracking your net worth is the first and most important thing you must do.  I love watching the television show “Man versus Wild”.  For those that haven’t seen it, it is an intensely addicting reality show of a man who gets dropped in the middle of nowhere (sub-Saharan desert, tropical rainforest, Alaskan tundra) with only a parachute, a flint, and a pocket knife.  He then spends the next several days or weeks trying to find human life.  The first thing he typically does is to try to get to the highest peak to “find his bearings”.   This is why tracking your net worth is the most important task you will do…it helps you find your bearings.  In other words, what is your current state and where do you go from here?

I’ve been tracking my net worth daily since 2006.  You can use a variety of free websites, such as Mint.com, but if you have a Fidelity account, they have a feature called “Full View”.  After you set this up with all of your accounts (loans, credit cards, bank, mortgage, etc.), you can begin tracking your net worth.  I go on it every morning and hit a single refresh all accounts button.  Then as I go about my work, it pulls data into Full View in a matter of a minute or two, my net worth is updated.  I have kept this on a tracker to ensure that my assets are growing at a reasonable pace.  Below is my net worth:

Each tic mark on the y-axis represents $50k.  As you can see, most of the growth occurred after the market bottomed out at the end of 2008.  We were fortunate enough to have a significant jump in income right around that time which allowed us to plow more money into our retirement and investment accounts.  The second thing you need to do is track your assets and your liabilities to see where the growth in net worth is coming form.  Is it coming from a growth in your assets or is it coming from a reduction in your liabilities or both?  Our asset and liabilities tracker is below:

The blue dots represent our assets and the red dots represent our liabilities.  A couple of things to note here.  Each tic mark on the y-axis represents $100k.  Yes, there was a jump in both our assets and liabilities in May of 2009.  This was the purchase of our current primary home.  You will also notice that not much growth occurred in our assets over the last year, but we were paying down debts over this time. 

Take away:  Start tracking your net worth NOW

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