The One Hour Project: Build Your Own Net Worth Calculator

This post is part of The One Hour Project, in which you can spend just one hour to put your finances in a better place without a big lifestyle change, through frugality or other financial choices.

One of my best motivational tools for staying on a good personal finance track is my own personal net worth calculator. I use it constantly to keep tabs on my own financial moves and to make sure I’m constantly spending less than I earn and also constantly reducing my debt load.

A few months ago, I wrote a very detailed description of how to actually set up a net worth calculator on your own computer for free using a spreadsheet, so I won’t repeat it here – if you’re interested, you should use that tutorial – it is one of the best things you can do in an hour to keep yourself motivated to get ahead financially.

Instead, I’m going to address some questions about building and maintaining a net worth calculator.

How often should you calculate your net worth? After trying several patterns, I have found that the most useful pattern for me is to calculate it midway between paychecks. So, let’s say you’re paid every two weeks on Monday – you should calculate your net worth on the Monday when you’re not paid. If you’re paid weekly, calculate it on a weekday as far from payday as you can. If you’re paid monthly, calculate it two weeks or so away from payday.

Why does this method work? Most people have a money flow where their checking account balance spikes on payday, then gradually goes down until the next payday. By calculating net worth regularly on a schedule that accounts for that money flow, you can more clearly see progress over time instead of seeing a lot of peaks and valleys.

What should I include as an asset? This is something that many will argue about, but I generally suggest that you include an estimate of the value of your house, the blue book value of your cars, and anything exceptionally valuable that can be resold that you own. Obviously, all of your account balances should be included, too.

What’s the real benefit of doing this? Every single pay period, make it your goal to increase your net worth. Ways of doing this include paying down debts (there won’t be an immediate effect from this, but the long term effect will be great as you’re not paying interest), looking for methods to earn more money, and perhaps most importantly, spending wisely. The calculator, if done consistently, is both a great motivator and a great way of keeping track of long term progress.

Even better, once you’re consistently increasing your net worth each period, you can set more goals: a certain percentage increase each period, for example. If you keep doing it over and over, you will reach a state of financial freedom, guaranteed.

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  1. Robin says:

    Oh good, this looks like a great way to procrastinate my studying for another hour. And feel productive at the same time. :)

    I think I’ll start work on that spreadsheet now. Excel is my friend.

  2. Dave says:

    I keep my cars off mine, because I have no intention of selling them, ever. (Well, not the car that’s worth anything, anyway)

  3. Jamie says:

    I use Google Spreadsheets for this. For starters, it’s free. But even better, Google Spreadsheets has a function that calls the day’s stock quotes . That means you have to update how many stocks you own but not the stock price every time you want to reevaluate your net worth.

    Just a thought…

  4. FIRE Finance says:

    Jamie’s tip is really cool! We too do not put our car’s current market value in our networth sheet (MS Excel). We plan to drive it forever like Dave. But as Trent says, tracking networth really gives a great feel about where we are on the financial road map. Also, we set goals every month for our expenses and see how we fared on each of them. This gives us an idea about which area of our expenses need a tweak.
    Thanks for the great post.

  5. Mrs. Micah says:

    Good stuff! I had to make one of these for my personal finance class. Now I’m using NetworthIQ, but that’s because it’s already set up. Still, putting the numbers into a spreadsheet at the same time. Then it would be saved on my comp instead of online.

  6. Attila says:

    I don’t understand the spike thing. If you calculate your net worth on each payday (or before each payday), there won’t be any spikes (or valleys), since each entry will contain about the same amount of surplus.

  7. Ryan says:

    The only time a car should go in your net worth calculator is if you use the debt portion of the car loan and not the value of the car.

  8. Trent says:

    You get the idea, Attila. You want to calculate your net worth at a certain time in relation to your payday each time. This way, you avoid sometimes having a spike and sometimes having a valley, which gives an awkward picture of your net worth.

  9. Debbie says:

    I like to calculate my net worth after my paychecks. I get paid at the first of each month, and then immediately a bunch of it gets transferred into retirement accounts, savings accounts, etc. So right after that is when I do my calculation.

    I deal with the spike phenomenon by not including my checking account or cash-on-hand in my calculation–that’s really the only part that changes during the month. Right after pay day, I calculate how much I have on my credit cards, how much will disappear in monthly payments (mortgage, Netflix, etc.), then calculate how much additional cash I can transfer from my checking account into savings and still have an additional $750 to cover me for the rest of the month.

    So after I transfer this money to savings, and add up the additional retirement money, interest, etc., that’s when it’s the most exciting to see my net worth, and thus when I’m most motivated to do it. Sometimes when the stock market does something wonky, I’ll update those numbers mid-month to see how that affects the bottom line.

  10. disavow says:

    My net worth is even more bursty than most, thanks to an accelerated (five-semester) degree program and tuition reimbursement. Pretty much no way can I ensure net worth growth each pay period, so instead I plug montly net worth figures into Excel and use its trend plotter to see what average growth is. As long as the positive trend stays the same or improves, I know I’m spending/saving responsibly.

  11. Dave says:

    Good posts! I have to try that google spreadsheet one.
    I keep track of mine in Excel, and just try to make sure it goes up every month. Sure, some months my stocks bomb, but since I’m saving/contributing, I usually go up. And then when stocks go back up, it goes up even more!

  12. alo says:

    I’m a new convert to this site. The quality Trent’s writing and the commenters is high.

    I surprised no one ever mentions Quicken, which I’ve used for years to track all my assets, accounts, budget and net worth. Never thought of building my own in a spreadsheet. Is there a reason (aside from cost of software-$40 saved!) that you all prefer google/excel?

  13. Schwamie says:

    For calculating my net worth, for the assets, I leave off my checking account (as that is used primarily for bills anyway). I only include savings accounts (401k, IRA’s, cd’s, savings), stocks and mutual funds, BV of cars, purchase price of my house (not accounting for any upward valuation of it as I’m not looking to sell and I’ll let that be a surprise if I get more than I paid), the ebay value of my other goods (music/dvd’s/stamp collection/etc.). I do not include the 529 accounts for my children nor any “loose change”. As for my liabilities, I have the remaining amount on my mortgage, student loan, and child support (until she turns 19). While I have other monthly obligations, I have my paycheck that routinely covers these costs. The net worth is a long term view condensed into a present snapshot of what I have. As such, the amount is not as great as I could make it look, but since the number is important to me (and my family), I have no need to inflate that figure.

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