One of the things that I struggled with initially when starting my student loan repayment was the sheer amount of debt I was really in. I had about $8,000 in the bank and over $80,000 in debt. That’s a $72,000 gap between the two, and that was probably what my net worth was at the time! Not everyone has the opportunity to start from zero, and that’s okay. It might take us a little longer, but with some dedication and budgeting you may even surpass your peers. I had provided a net worth update before when I finally broke out of the negative side of the equation, and I wanted to revisit that subject now.
From a personal finance standpoint, net worth is your assets minus your liabilities. Assets are things like cash, money you have in accounts, cars, houses, property. Liabilities are any outstanding debts that you have. When you subtract the two, you end up with your net worth. Unfortunately , most new graduates are not even able to start from zero and have to dig their way out from a negative number. We don’t even get to start with a blank slate. This can be a daunting task and can compound itself when you suddenly face student loan payments and other new expenses.
Fortunately, things are not all doom and gloom – there is hope! Even though you might be stuck with a negative net worth for the time being, you can still make positive progress. Do you remember your fifth grade math? We’re going to be adding a positive number to a negative net worth to make that number “bigger” or “less negative”. From my perspective, being able to see this progress actually happen and tracking it has enabled me to stay motivated. You see the tangible progress being made and then you have an estimate of when you will break even. Then your first $1000, then $5000, and the goals keep piling on.
Before, I had used spreadsheets to track my net worth. I would copy the balances of my accounts over onto a new section each month to track the progress I had made. Personal Capital now has tools that make this even easier and they even make it nice to look at. Sure you can make graphs and tables in Excel, and you can even make them look good. But this takes all the guess-work out of that and will save you a good amount of time after you complete the initial setup.
You are able to link your accounts to speed this process up even more, and then Personal Capital automatically tracks these accounts for you. If you have ever used or heard of Mint, this is a similar process to using that. You can also manually add assets and accounts if you feel more comfortable with that approach. But while Mint may be great for budgeting and keeping track of your money on a daily basis, Personal Capital keeps their focus on investment and long-term growth of your portfolio. The best part about the service is that it is completely free to check out and use. If you do need professional help, they do provide financial advice for a fee.
Once you login and select the net worth calculator you see a broad overview of your net worth across all accounts. This would be your true net worth since it shows the total of all assets and liabilities. This is just as I had defined net worth to you earlier on. You are also able to break down your net worth by category: cash, investment, credit, loan, mortgage, and other. This is useful if you are focusing on a single goal, or just looking to see how one part of your finances is affecting your net worth.
I now have my accounts all linked up, and I’m hoping that in my next net worth update post I can share with you how the application is working out for me. If you have used Personal Capital before, what are your thoughts on it? Or how do you keep track of your net worth?
photo credit: escalator in airport stuttgart via photopin (license)
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