Do you track your net worth?

[Douglas Skipworth]

I'm teaching a class on buy and hold real estate investing in Memphis and I'm looking for some real life examples to share with the students.

Here's the brief background on my question below.

I believe 2 things.

1. People who regularly measure their net worth have a larger net worth than those who don't track it.

2. People who track their net worth regularly grow their net worth faster than those who don't measure it regularly.

If you're like me and you belief these 2 statements (I'm assuming everyone does, right?!), will you share some basic facts with me about your experience so I can have some real life examples to encourage with my class with (below is my personal experience)?

Personally, I have been tracking my net worth on a monthly basis since 2008 and it has grown 50X over that time period.

What is your experience with tracking your net worth?

[JD Martin]

Quote from @Jeremy H.:

Quote from @Douglas Skipworth:

Great comments above!

Below is the median net worth of Americans by age according to a recent "Survey of Consumer Finances" conducted by the Federal Reserve.

Under 35: $13,900

35-44: $91,300

45-54: $168,600

55-64: $212,500

65-74: $266,400

75 and over: $254,800

At this stage in your life, if you are ahead of the average American, what do you attribute your "success" to?

Personally, I am ahead and real estate investing played a significant role in getting me there.

Eye opening statistics

I track my net worth yearly - it's more of a game/challenge to me and I like to see how things are balanced. I'm basically 50/50 right now between real estate (accurate equity assessment) and stocks (index funds/401k, roth IRA etc). I like to maintain a degree of diversification and liquidity, and although I like RE, stocks, especially retirement stocks, have some really good benefits as far as tax deferred growth and tax free gains.

As far as your 2 beliefs - I think it's more that those who track their net worth likely have better financial habits and responsibility than those who don't. I don't think actually tracking your net worth does anything significant, but I think those that do it, do it for a reason and may even have goals associated with their net worth as well as other financial goals. These goals and habits are what drives someone to track their net worth, in my opinion. 

In my personal experience it's motivating and informing. You can see what works (equity capture at the buy for example can increase your net worth instantly), what doesn't work, what's within your control, and what may be out of your control (negative year in the stock market). 

You can also get a good sense of how your portfolio is balanced. I can see my retirement (401k, Roth IRA), my liquidity (index funds/personal emergency fund/RE emergency fund), health related expenses (HSA), kids college (529 state plan), savings (HYSA), Real Estate equity (through appreciation, equity capture at the buy, loan paydown) etc. So I separate mine into categories, then combine the similar stuff (RE equity vs money), then combine the two to get a total.

I do think it's very important to track your progress - it's the only way to improve in my opinion. 

Benjamin Franklin said something like "Watch the pennies and the dollars will take care of themselves". I think this is highly important - if you budget monthly, watch your cashflow on a property by property basis (as well as overall portfolio), choose good properties you can force equity into and capture equity at the buy, choose good stocks that consistently gain over the long term, then your net worth will take care of itself. 

 Exactly. Correlation is not causation. I am certain there's a strong correlation between people who track their net worth and increased net worth over time, but I don't think it is because they tracked their net worth. Rather, people who are prone or conditioned to think that way are going to be constantly doing things that increase their net worth, or at least considering whether or not their actions will have a detrimental effect on it. I definitely track mine but it doesn't particularly motivate me to work harder to make the number bigger. Aside from my banks, I just want to know what it is because I want mathematical confirmation that the crux of my actions over the course of a year (I actually track it about every few months if I'm not submitting it to someone) are contributing to rather than subtracting from my pot of gold. 

As for the median American in my age group, yes I'm way beyond that and I attribute that success to the following:

- Willing to delay gratification on a regular basis

- Willing to do jobs no one else wants to do

- Willing to work long hours for results (a strong work ethic)

- Willing to take calculated but high upside/low downside risks

- Willing to allow the "fruits of my labor" to be returned to the business instead of paying for a lavish lifestyle

- A strong commitment to these principles by my spouse

- A strong run of being healthy enough to work to produce excess profits

- The fortuitous grace of being born and growing up in the United States, where opportunities for financial success are everywhere and accessible to anyone

- A splash of luck at being in the "right place at the right time"