I am a subscriber to, and avid reader of, the Motley Fool's message boards. Mostly I just pay my yearly subscription fee and loiter on Fool turf every evening, reading and sponging up all the good information and entertaining stories over there. (If you're into personal finance and investing, the Fool boards are easily the best I've found on the web. Since the Fool now charges membership fees, high post quality and worthwhile content are pretty much the norm. And if you're ever browsing the boards and you see a post by a guy named "Storytelr1," then you'll know who it is.)

Anyhow, I was cruising the Consumer Credit / Credit Cards message board this morning. I found myself reading and rereading one post in particular, and the interesting part read like this:

Many, though, need things more scripted to reach the state you've already reached: steadily increasing net worth, month by month.

First off, thanks go to "xraymd" for posting this. She probably thought nothing much about it, typed and posted it out there in a matter of seconds, but it struck a chord with me. In other words, she flipped on a dim nightlight inside my sometimes-dense noggin.

What I'm focusing on is that part about the "steadily increasing net worth, month by month." The more I read those words, the more I see rock-hard truth in it, and pure simplicity. And I am very big on simplicity.

Here's the thing:   We know that, put simply, net worth is [what you own] minus [what you owe]. People (at least the eleven of us who even have an idea of what our net worth is) tend to zoom in on where their net worth is right now. But I'm beginning to believe that it's where your net worth goes from here that deserves most of the attention. Does it go up? Does it go down? Can you shake it all around?

Now that I think about it, perhaps a little background is in order. Net worth is your answer to the question "I've earned all this money over the years; what do I have to show for it?" College-level finance textbooks will tell you that it is your assets (everything you own) minus your liabilities (everything you owe). But the concept of net worth is drawn much more sharply in the words of author Joe Dominguez:

It is what you currently have to show for for your total lifetime income; the rest is memories and illusions, as far as the reality of balance sheets is concerned.

How's that for a dagger in the gut? The balance sheet, of course, is the form or spreadsheet you complete in order to calculate your net worth. And if you've never figured out your net worth, well, I just happen to have what I think is a pretty good balance-sheet spreadsheet on my Excel page. The thing practically completes itself. So now you don't have much of an excuse not to do this, do you?

As I check my records, I see that I began actively tracking my own net worth in October of 2003. To this point, I've updated my balance sheet (and thus, calculated my net worth) quarterly. Because it is imperative that I see myself making progress, I keep all my old balance sheets on standby. People may call me nuts for doing this, but I know what motivates me. I know what makes me tick. I love to wrap my brain around cold, hard facts, which means I actually look forward to filling out my balance sheets (and monthly spending plans, for that matter) at the end of each three-month period. I have been extremely fortunate, in that over time, the news these spreadsheets relate to me is pretty encouraging. So encouraging, in fact, that perhaps I'd be better off tallying my net worth every single month. It bears consideration.

In the end, striving to increase your net worth on an every-month basis makes for an interesting goal. Obviously, it won't always happen, because there's this thing called Life that often interferes. Your stocks take a dump; your Chevy begins puking oil; the bottom falls out of the market for your wife's grandmother's dog's antique water bowl. But if we can abide the common fluctuations, I think that monitoring our net worth monthly might be downright useful as a motivational tool.

And yes, "xraymd," you have it right. Bumping one's net worth upward on a monthly basis is certainly an admirable goal at which to aim.

Michael | August 19, 2004

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