The Importance of Tracking Your Wealth

tracking your wealth

Do you ever track your wealth? You may not consider it important to do so. After all, you know how much you have because you live paycheck to paycheck. Indeed, more often than not, your money runs out even before the month is midway through.

What you may not know is that your spending patterns could be the reason. Your finances might improve if you keep a tighter rein on expenditure.

Research on the average American household reveals some interesting insights. On average, an American household has $132,529 in debt. Forty-four million Americans are currently grappling with student loans. Ten million households in America do not have a bank account.

All these are indicative of people struggling with financial management. Yet a solution could lie in wealth tracking. Knowing what you own and how you spend could bring you back to good financial health.

Let’s uncover why you should keep a close eye on your wealth.

Wealth Tracking Helps Bring Spending Under Control

Look at your current financial situation. Do you struggle to keep up with bills despite earning a good income? The reason could be that you are not good with money. It is pretty easy to spend, isn’t it? We are also living in an era when credit facilities are readily available.

You are sinking further into debt every time you swipe that credit card. That means the loan balances at the end of every month are pretty high. Whatever you get goes to paying debt. Before you know it, there is nothing left. Hence the expression living from paycheck to paycheck.

The best way to bring your finances under control is to track your expenditure. You also want to avoid living a life where you scrutinize everything you buy.

But it might be worth the sacrifice if you find that you’re struggling. You can download an expense tracker app or use the traditional pen and paper. The advantage of the former is automatic tracking and categorizing of your expenses.

Also, learn to live off a budget. Have a column for must-have expenses. These include rent, groceries, debt repayment and utilities. In the other column, have the things you want but can do without.

Also, see where you can save some money. Yes, eating at a restaurant during your lunch break may be convenient. But you could save a lot by carrying a packed lunch instead.

Here is a tip you will like. Allow yourself an occasional indulgence. Many people fail to stick to their budgets because it ends up feeling punitive. So, if you enjoy weekend outings, cut it back to once a month instead of every week. Use what you save to settle a debt.

You Can Make Better Investment Decisions

Investing is a good idea because of the potential to make good money. You have put aside a considerable amount in stocks and shares. But, do you take time to know how your portfolio is performing? 

Or do you wait for the payouts and ride the tide as far as your investments are concerned? If the latter describes you in any way, you need a wealth tracker. With a wealth or portfolio tracker, you get clarity on what you own and how well your portfolio is performing.

The portfolio tracker also gives information on the performance history and investment returns. You can also compare investment metrics to determine where to put more cash.

Automation in the investment tracker removes the manual management of your finances. You don’t need spreadsheets or inputting of data by hand. And you get to track all your wealth in one place. So, no need for many files or excel spreadsheets full of investment information.

Wealth Tracking Allows You to Know Your Net Worth

To know your net worth, look at what you own and owe. If your assets exceed liabilities, that is positive net worth. If the reverse applies, you are in the negative net worth category.

An asset is anything that you can convert into cash if you need to. These include investments, retirement funds, real estate, and bank accounts. Personal items with value, like jewelry or vehicles also fall on the list.

Liabilities include credit card debt, mortgage, and student loans. A positive net worth report should give you the impetus to keep up with the excellent work.

Assigning accurate values to assets can take time and effort. The wealth or portfolio tracker can give you a pretty good idea of the value for investments. Yet, you need to factor in market fluctuations. Such will impact your investment portfolio value.

For assets like vehicles, it can be complex due to factors like depreciation. If you inflate the figures, it will give you an unrealistic picture of your net worth.

So why should you care to know your net worth? Well, it is the best way to know your financial health. If the liabilities far exceed assets, consider yourself financially unwell. That should be a wake-up call to take curative measures to bring you back to good financial health.

The dose of medicine you will need to swallow may be bitter. It will need you to take a keen look at your spending. We did share some practical and very effective ways to do so in the first point. The aim is to reduce the amount of liability you have by paying off debts. You also need to stop accumulating more, no matter how insignificant you think it is.

Once you remove the burden of liabilities, invest and save your money.

Final Thoughts

Is it essential to track your wealth? The short and simple answer is yes. It is a fantastic way to keep a closer watch on your spending. Often we spend money on frivolous things we can do without.

Swiping the credit card feels so good. But all it does is sink you further into debt. Yet, if you watch your wealth, it could get you to adopt more prudent financial mannerisms.

Wealth tracking also helps with making sound investment decisions. Also, you get a picture of your net worth, which can be a wake-up call for many people. Take advantage of tools like an expense tracker for your day-to-day expenses. A portfolio or wealth tracker app is excellent for monitoring your investments.

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The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.