The Net Worth is an important number. For an individual, it has the same role to play what a Balance Sheet has for an organisation. It helps you assess where you stand on a particular day with reference to your assets and liabilities.
Assets are what you own.
Liabilities are what you owe (to others).
Using your own earning power as well as a solid investing process, you can increase your Net Worth significantly over time.
However, it is equally important to track these changes. This helps you understand how the composition of your net worth is and how it changes over time. From a financial planning point of view too, you need to know what you can use towards your several goals and meet them effectively.
The Net Worth tracker sheet is a simple excel format to just enable you to achieve the above objectives. An interesting thing you will find in this sheet is an attempt to segregate the increase in Net worth in 2 parts:
- Change due to new cash addition (through your earnings)
- Change due to investment growth
You will also get to see your asset allocation over time. In fact, using the allocation numbers, you can make the right investment choices to restructure or rebalance the allocation in line with your investment goals.