Keep on Track
How do you know when you achieved financial freedom? Achieving financial freedom can feel like a moving goal post.
But through trial and error, I’m living proof that financial freedom is within reach regardless of past financial mistakes. It just took the tiniest of tiniest baby steps to start seeing improvements in my net worth.
If you are trying to achieve financial independence and early retirement, routinely tracking your net worth matters. EVEN after you've reached FIRE.
According to financial advisory firm Personal Capital, the median US household net worth is not sufficient for most investors to realize a comfortable retirement.
Net worth peaks at retirement age for those 65 years and up. House and property values may account for the majority of the net worth calculation.
For younger age brackets, net worth is impacted by holding significant debt such as a mortgage and student loans. In addition, the younger generations typically have lower salaries and less assets. But over time, these investments may result in higher net worth households.
Net worth = Assets - Liabilities
Let’s make sure we’re on the same page. Your net worth is every significant thing you own (assets) minus what you owe (your debts and other liabilities).
Assets includes cash, investments such as IRAs, 401k accounts, bonds, and stocks. This also includes your home and other valuables such as your car.
Liabilities include what you may owe on your assets and other debts, such as a mortgage, car and student loans. If you have any credit card debt, that number also falls under liabilities.
Simply put, net worth illustrates the amount in cash you would have left over after selling all of your assets to pay your liabilities. This figure provides a measure of your overall financial health and stability. Your net worth can either be negative or positive.
As mentioned throughout this course, creating multiple investments and income streams is important to achieve FIRE. But keeping track can be a major pain. I can barely remember my passwords to my social media accounts let alone all the other online accounts I have.
Through Personal Capital, you can also securely link all your financial accounts to get a complete picture of your net worth. Over time, you’ll see if your net worth is trending positively. Then, take steps to make adjustments in your spending and savings habits.
About 1 million people use the Personal Capital app to track and manage their net worth. Ready to face your numbers?