I started tracking my net worth three years, nine months and six days ago. I have a record of my net worth going back to October 2016. In that time, my net worth has increased 40 times over.
No other practice has had as great an effect on my financial consciousness.
Budgeting never worked for me. It was always saving in a vacuum with no feedback on my hard work. Budgeting can often feel like saying no to yourself. Net worth tracking flips this and allows you to give yourself a resounding yes. It’s a commitment to watching a line graph go up and to the right.
With that, budgeting in a vacuum becomes a tool in service of that goal.
Budgets can work when there’s something positive you’re saving for.
When it’s aimless accumulation, you need some way of measuring success that is more tangible than a snapshot of your bank account or portfolio.
It seems trivial that a simple line graph could be the tool that changed my financial habits. But it was life changing for me.
I didn’t think much about money as a kid. It wasn’t until a high school girlfriend, with whom I was enamored at the time, gave me an off-hand ultimatum stating that I needed to make at least $200,000 a year in order to marry her. Whether I wanted, in my heart of hearts, to marry that girl or not, this proclamation burned its way into the core of my consciousness and would be the fear that undergirded most of my decisions in the five years following.
At the time, I dreamed of becoming an architect. The median salary of an architect is $80,180 as of May of 2021.
Clearly that was no longer an option.
Not only would that career path be insufficient, everything would be. My ideas surrounding money instantly changed as my self-worth was now attached to my current earnings and future earnings potential. With this new logic, there’s no amount of money that will make you worthy other than all of it or at least more than the Jones’ nextdoor.
It’s a sick game.
Money became an all-consuming fear. I allowed my value to be dictated by the throwaway remark of a spoiled 17-year-old. I felt that every dollar I spent was a catastrophic insult to my future billionaire self who would only come into being if I were to squirrel away every penny and hold on to the power of compound interest for dear life.
In reality, my strategy for becoming a worthwhile human by saving as much as possible and maximizing my short term earnings potential did not look like the actions of a confident self-actualized individual. Instead, it looked like an antisocial college student eating Taco Bell Beefy Fritos Burritos daily because a blog called Efficiency is Everything told me it was the best way to maximize calories per dollar.
I dropped my architecture major and worked every semester and summer. Working seven days a week, not because I needed to, but because I was compelled to.
This was not a good look.
It was around this time that I decided to start tracking my net worth.
It was fun to look at the past. Patterns emerged. Apparently every time I got romantically involved my net worth would nosedive.
I would enter my net worth into my tracker semi-regularly, around once a week for four years. It was a tangible visualization of my choices and above all else it made it clear what choices made the line move and what choices had no impact at all. The Fritos Burrito was not my true enemy. Though I’m sure that does not surprise you.
It started with the fundamentals:
These three pillars have defined my financial life and tracking my net worth opened me up to these obvious truths.
This was not it's true impact though. This new habit led to two unintentional findings far more important to me.
- It freed me of overwhelming money anxiety.
- It brought my decisions for the present squarely into dialogue with my life in the future.
The anxiety I’d carried around money since the end of my childhood, which I thought was the anxiety of not having made it yet, was at its core, the anxiety of not making progress.
In the space after I had developed the goal of being tremendously, offensively wealthy (whether by my own design or otherwise) and before I had developed a tracking practice, all I had was the constant reminder of how far I was from my goal.
However, the tracking practice was a constant reminder that I was making progress.
That was all it took to shrug the weight off my shoulders. Have I made any more money than I would have otherwise? Probably not. Have I saved any more money than I would have otherwise? Maybe. But what I know is that I no longer catch myself daydreaming about get rich quick schemes or feeling guilty about my present or regretful of my past. Instead I have faith in the inevitable progress my graph has proved. Even when I see significant drops from market forces or big expenses, I see how those setbacks flatten out as time progresses and the line stretches ever onward pointing toward a future of abundance.
Tracking my net worth did not make me rich, but it did make me feel less shitty about not being so.
Saving Money Smarter & Easier
My personal finance systems never evolved much beyond tracking. My tracking never led me to set an explicit budget. Instead, it did something far more powerful. It made me conscious of the way my present choices would impact my future.
It is one thing to read about budgeting or to tell yourself you know you could be spending less. It is another thing entirely to visually see the ways that your net worth reacts to changes in your lifestyle.
When you do not track your finances, you can’t form a relationship to your financial future– it’s flimsy and vague. Tracking it puts your financial future as white space on a graph, infinite potential with a trendline pointing you to what the future might look like.
It’s an easy future to get excited about, but it’s a future that relies entirely on the choices you make in the present.
In the time before tracking, my purchase decisions were made primarily on a fleeting whim. Thinking moment to moment is often reactionary to our present mindset and appetites, despite repeat evidence that those appetites of mine are temporary.
Tracking made my financial future feel more real and tangible. My purchase decisions were now a dialogue between the present and the future informed by an intimate knowledge of the past.
I know that money spent today has the potential to be exponentially more valuable in the future because I am now sitting on the fruits of the sacrifices of my past. So maybe the burritos did technically help. 🤷♂️
I don’t save money by systematically telling myself no to things. Instead, I have baked future considerations into my moment to moment whims and in doing so I have dulled them or at least made them more manageable. I have seen the ways that frivolous spending has delayed my future and how spending money on what matters to me happily justifies the delay.
Now, it is second nature to say no to things I don’t want and my decisions are guilt free and instantaneous when I say yes to what I truly do.
Making smart financial choices has moved out of the realm of willpower and into the realm of automaticity.
It’s honestly magic.
What should you do?
First, If you take one thing away, it’s that the choices you make around the largest expenses in your life like housing and transportation are your fastest, most impactful lever for changing your financial reality today.
Second. If you aren’t saving and investing for the future, start today. An easy way to implement this habit is to automate your savings. Automate the flow of your income so with each pay cycle, a certain amount is automatically transferred into a separate account.
Third, Try changing your default answers on small purchases. It’s not about saying no to what brings you joy. It’s about adding a beat between the desire for something and the purchase of something. Just add a pause long enough to add a new voice to that conversation: “Is this what I really want?”
These have been the biggest lessons of my journey and there is no need to track your net worth nor calculate it to bake these lessons into your life.
If you want to have an active relationship to your financial future rather than a passive one, then tracking is the most powerful way to make your financial life real and tangible. It’s no more than facing your financial reality. Even if that thought is intimidating, the side effect is a much more open, exciting, and confident relationship to your progress toward financial freedom. And if you’re struggling with anxiety related to money, I have no better practice to recommend.