Checking on all the eggs in your nest each month will help you win!
I know zero colleagues, friends, or family members who wish to work forever. It seems that most everyone has painted a picture of what they hope their retirement will look like, and an age they envision to stop working by. The problem is, not everyone has a clear plan on how they can turn those dreams into reality. In 2021, The Guardian published this article with many sad stories of Americans who couldn’t retire or had to go back to work because they didn’t have the money to stay retired. In addition, the article discussed how the number of workers aged 75 or older is increasing. Also in 2021, CNBC shared that a report stating that 41% of Americans say it's 'going to take a miracle' to be ready for retirement. A tool I created that my wife and I use to track progress towards reaching our retirement nest egg goals is a “Net Worth Tracker”. Here are three tips which describe how the tracker, or a similar approach, could help you win with YOUR money to ensure you can retire comfortably.
1.) How to use the Net Worth Tracker-When you view the Net Worth Tracker example below, you will notice five columns. I’ll break this down in a moment, but first I’d like to point out that while the tracker provides a one-screen overall snapshot of your financial picture, it correspondingly provides opportunities to celebrate success and find immediate areas for further exploration.
Column A (Account)-Each account is listed. You can get as specific as you want with this. If you have a wide range of accounts, it may be helpful to keep a separate (and secure) column, tab, or document with account links and login information.
Column B (Amount at Beginning of Month)-This shows the amount of money that was in each account at the beginning of the month you are tracking, or the end of the past month. If any of the rows contain a debt account (for example, row 11 is a car loan), you would enter a – symbol in front of the dollar amount, because remember, Net Worth Equals Assets MINUS Debt!
Column C (Amount at End of Month)-This is where you would input the updated amount in each account at the end of the month. The obvious goal should be for the assets to grow and the debts to shrink! When you move on to start a new month’s tracker, all the data in this column can be copied and pasted into Column B.
Column D (Change)-This would be the difference in each account from the beginning to end of the month. Again, the goal here is obvious; to have a positive value in each cell.
Column E (Notes)-This is a space to write notes as needed to remind yourself of issues that may have popped up in one or more of your accounts, or a next step that needs to be addressed.
If you are handy with excel, formulas can be added such as adding/subtracting between cells, and conditional formatting to add color which can highlight the accounts that have increased/decreased. I created this tool and offer it, among other resources, to TFC clients.
2.) Your hands are kept on the wheel-As a father of two young children in a home with two full-time working adults, I know life gets chaotic. It is incredibly easy to get disorganized and not pay attention to your money. However, as I have previously shared when talking about the importance of a monthly budget, by not taking a little time to control your money, the money can start to control you.
Once you get your account information organized, keeping up with this tracker can take just a few minutes per month. You may spot areas that require more of your attention. For instance, you can see in the example above that two accounts went down; the Emergency Fund (some more of which I would suggest using for the debt and then building that back up later with all your extra money) and the 403B Retirement Account (it is not the end of the world if investments go down at times, but since all of the other accounts grew, it would be worth a closer look to see if there are better options within that fund).
3.) The big picture stays in focus-As literally every dollar to your name is put in front of you, it will become second nature for you to set and track goals each month as you jog the marathon towards retirement. Throwing some broad numbers out here: Let’s imagine the owner of the tracker in the image above is 45 years old, with a goal to retire by age 62. In analyzing the past month, we can see that even with some debt that needs to be shed, this person’s net worth increased by $7,500 in one month. At this pace, we would expect the net worth to increase by $90,000 in one year. Not bad!
Now, once the debt is gone, the funds in this person’s investment accounts should rise exponentially over time through the power of compound interest (not to mention other reasonable expectations such as salary increase). I’m going to be super conservative and just pretend this tracker will grow at a constant rate of $90,000 per year for the next 17 years. Pop quiz: How much money should this person anticipate having in their nest egg upon reaching the retirement goal age of 62?
That’ll work!
Conclusion-Along with a monthly budget, a Net Worth Tracker can be a valuable instrument to ensure you are playing the right notes in your nest egg symphony. Just like the budget, once you get the hang of using your tracker, you can spend just a few minutes each month looking at the growth of each account. This process may guide you at times to areas where further attention is needed. You will also gain the capacity and confidence to move one month at a time towards retiring when, where, and how you want to.
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