Keeping track of your budget and getting out of debt can feel overwhelming. There's one number that can help put things in perspective, and that's our personal net worth.
Your net worth, simply put, is the difference between your assets and debts. Add up your savings, your property and any cash you have on hand, and subtract your loans and debts until you have a final tally of your overall net worth. Sounds simple, right? However, as finance blog The Simple Dollar explains, knowing this number from month to month — and how it changes — gives you a tangible metric for how your life is improving, even if you don't experience it every day:
An increase in net worth meant that I was unquestionably spending less than what I earned, which is the key to personal finance success. An increase in net worth meant that all of the hard day-to-day choices I was making were actually adding up to something big.
It was exhilarating. Each time I calculated that number, I could clearly see the impact that my choices were having even if they weren't really evident in my day-to-day life.
The entire piece is worth reading. The writer goes on to explain how calculating his net worth eventually became superfluous because the results of years of good financial decisions became more readily apparent. However, if you're starting out and trying to gradually move your way up, knowing that golden number can keep you on the straight and narrow.
Net Worth and Pleasure [The Simple Dollar]