It is human nature to want to know where you stand in the world.
Are you ahead, keeping even, or even worse, falling behind your cohort?
That is why there are popular benchmarks to aim for regarding almost every aspect of life.
In the financial world, the most important barometer is your Net Worth.
As a quick refresher, your true Net Worth is the value of all your assets (which can include stocks, bonds, real estate, jewelry, art, etc.) minus all the debt you possess.
Thus your net worth can be positive (your assets are worth more than your debts) or negative.
Obviously the former is a far more desirable position to be in than the latter.
Net worth takes away superficial trappings that sometimes gives the appearance of success and boils it down to true actual wealth.
I am sure many of us know colleagues who despite being high earners in the medical field are living paycheck to paycheck.
From all outwardly appearances these Dr. Joneses appear to be successful beyond our wildest imaginations, with the Dr. McMansions, the luxury cars, and finely tailored attire.
Yet if they are highly leveraged with credit card debt, mortgages, and personal loans, than this really is a facade and they are likely worse off than the average Joe on the street.
(a must read if you have not yet come across a copy).
Although calculating your Net Worth is a seemingly simple concept, it can quickly become complex given the various moving parts that fluctuate at any given time and often spread across numerous entities.
Sure, if I wanted to, I could log into my accounts each time and calculate my net worth manually (which for me personally would involve logging into two bank accounts, one brokerage account, one employer retirement account, one employer pension account, one individual retirement account, and one health savings account).
But just getting the face value of these accounts is not enough.
I would then have to break down the value of individual holdings in each account, assign that value to a specific asset class, combine them with like holdings in other accounts and use that information to help me determine if my particular desired asset allocation is still being implemented and adjust accordingly.
I’m not sure about you but the sheer amount of data just to do this one time would make my head swim.
I therefore searched the internet for tools that would help me assimilate all this data into one convenient access point and do the necessary calculations for me.
Thankfully such a wondrous tool existed!
Personal Capital truly is a Godsend to those in a similar predicament to me.
If you have been perusing financial blog sites, you have likely seen the Personal Capital ad banner (in fact this was the very first ad banner I placed on my site which conveys the importance I give to it).
It is 100% completely free to use.
I thought the same thing myself when I first stumbled upon Personal Capital.
I assure you I have been using this service for over 3 years and have not paid a dime to Personal Capital.
Obviously Personal Capital does have some motives in providing such a powerful tool to use freely.
They do ask you to input your personal information and you will get a periodic email asking you if you would like to have one of their financial advisors contact you and go over their paid services.
They even offer a free full analysis of your portfolio and give you a detailed power point presentation of what you are doing right (or wrong) and what can be improved.
You then have the ability to decline professional management and continue on your own, or if you are not the type of person who likes to manage your portfolio, you can certainly take advantage of their paid services.
I had the complimentary analysis done and, thanks to previous help from the Bogleheads and White Coat Investor, both the financial advisor and myself came to the conclusion that I was already on the right financial path.
Even though there was still potential for a little more tweaking of my portfolio, it did not justify the added expense for active management.
And really that was it.
I would periodically get an occasional email or phone call asking if I would like another complimentary assessment but was never pressured to do so.
Another concern that you may have, as did I, was security.
It felt a little unnerving putting all my account details and passwords into one site (which is a necessity for the net worth tool to get access to all the required data).
This article does a wonderful summary of all the safety precautions that indeed make this a very secure access point for your financial data.
The fact that it is set up as a read only system (i.e. does not allow for transfer of funds to be initiated from this site) is just an example of how your financial accounts will be kept safe.
During my time as a Personal Capital user I have not had one issue regarding security or anything else.
So if you are not one of the countless individuals using Personal Capital already, please do me a favor and click on my Personal Capital banner link and join (full disclosure I do get compensated for accounts created using my ad but this is at no cost to you).
I will do a follow up high yield/informative post next Tuesday on how I specifically use my Personal Capital net worth tool to specifically keep my portfolio balanced according to my investment statement policy.
As a bonus, if you do an email subscription to my blog, I will send you an email giving you a link and password to my Fortress of Solitude where I keep a secret hidden blog page (giving you access to an Excel Net Worth Spreadsheet template I created and use (along with Personal Capital) to monitor my asset allocation.
For those who have already subscribed by email before I offered this bonus, you should have received an email this weekend containing the link and password as well (and thank you for being part of my OS (Original Subscriber) crew). If you did not receive this email (possibly in SPAM/Junk folder), please drop me a note on my contact form and I will personally send it out again.
I’ve been using Personal Capital for a while now and I love it. It’s great to be able to see all of my accounts in one place, and the reporting is really helpful too.
It is a great tool! I use it as well and am eagerly awaiting hitting ZERO! Yep, Zero net worth here we come! We started at a bit over (or under, whatever less money is) -$450,000. The progress feels good.
I remember using Quicken and then Mint but I also now use Personal Capital. Once you enter your accounts, it is nice to routinely check on all your balances in one place. I also like that they do a fee analysis on my different funds. They do call or text me once in a while but I just ignore the call.
Yes the fee analysis is a wonderful tool. Next Tuesday’s post is going to go into detail in all the features available with Personal Capital that I think will be helpful for everyone (it is so much more than a way to just get total net worth). Have a great day.
These were exactly some of the things that stood out to me when reading the millionaire next door. The idea that a Surgeon who makes hundreds of thousands yearly could be mismanaging their finances and be worse off than many who make far less was shocking to consider. Makes complete sense though as you begin to understand basic financial management and net worth. I read this in my finance 101 class in college and this book helped change my life! Great post as always!
So very true! I am so glad you are starting with your daughter while she is young. People often do not realize the importance of teaching their children to handle money from a young age. You are doing her such a service by helping her to understand this now.
Personal Capital + Mint make my life so much easier, both technologies are clean and easy to use too!!
Great point on Mint. I have heard great things about Mint but have not personally used it. We do live in great times thanks to technology. What used to be absolutely painful to calculate can be now accomplished by just a simple login.