Tracking your financial progress

Money comes in, money goes out. For many people, this is about as deep as their understanding gets when it comes to personal finances. Rather than ignoring your finances and leaving them to chance, a bit of number crunching can help you evaluate your current financial health and determine how to reach your short and long-term financial goals.

As a starting point, it is important to calculate your net worth – the difference between what you own and what you owe. To calculate your net worth, start by making a list of your assets (what you own) and your liabilities (what you owe), and then subtract the liabilities from the assets to arrive at your net worth figure.

Your net worth represents where you are financially at that moment, and it is normal for the figure to fluctuate over time. Calculating your net worth one time can be helpful, but the real value comes from making this calculation on a regular basis (at least yearly). You may have the odd year where you net worth goes backwards but ideally your net worth should be increasing ever year.

Tracking your net worth over time allows you to evaluate your progress, highlight your successes and identify areas requiring improvement. It can be very motivating to see your financial position improving. How much has your financial situation changed over the last few years? Have you thought about the financial milestones you want to achieve in 2015?