We're told to keep track of a lot when it comes to our money.
Everything from how much we spend to how much we invest to what our credit score is.
But according to certified financial planner Sophia Bera, there's one thing we should know, yet often overlook: our net worth.
In her upcoming book, "What You Should Have Learned About Money, But Never Did," Bera says when it comes to your money, "if you don't know where you are, it's going to be tough to figure out where you need to go to achieve your goals."
Another way to think of your net worth is a snapshot of your current financial situation that shows the end result of everything you have earned and spent up until that point in time.
So how exactly do you determine your net worth?
Bera provides a simple equation:
Your net worth = what you have — what you owe
Here's the exact method the author uses:
I have a spreadsheet that I pull up, I log into my accounts online, and I enter the balance of each of my retirement accounts, savings, investments, and so on. Then I enter any debts and subtract this number from my assets to determine my net worth.
If you own a home you can pull the approximate value of your house on Zillow.com, and then subtract your mortgage balance to determine how much home equity you have.
A negative net worth — when you've spent more than you've earned — can be the wake up call you need to make some serious financial adjustments. A positive net worth, on the other hand, — when you've earned more than you've spent — can be a confirmation that you're doing well, and can help you plot out how much longer you need to reach your next financial goals.
Bera recommends taking stock of your net worth at least two times a year.
I meet with my clients every six months and one of the most useful things I provide at each meeting is an updated net worth statement. It allows them to see how quickly their net worth can rise by setting up automatic payments and retirement contributions. A simple Excel sheet with tabs at the bottom can show how your net worth changes over time.
See Also:Why A 6-Figure Salary Won't Make You RichHere's What Rich People Are Doing With Their Money In 2015Here's The Key To Choosing Between 2 Common Retirement Accounts
SEE ALSO: How To Calculate Your Net Worth