How To Manage Your Bottom Line
When I started viewing my net worth as my bottom line (a financial term referring to the amount after all expenses have been deducted from revenues), I was able to more effectively plan out how to grow my net worth. Everyone has a bottom line, that is, essentially their total income minus expenses.
There are lots of tools like Mint.com, Personal Capital, and Wealthfront to help track your bottom line/net worth, but for me, Excel has been the most effective; however, it is the most manual.
So here’s a condensed version of how I structure my Excel sheet to capture a snapshot of my net worth:
The top half (in green) indicates assets, which include my bank balance, stock account, etc.
The top half also includes examples of any income I am guaranteed to collect by the end of that given month
The bottom half (in red) includes impending liabilities such as credit card balance(s), upcoming loan payment, upcoming cable/PG&E/Water/Garbage payments, upcoming mortgage (or rent), upcoming preschool payments, etc.
The bottom half also includes major expenses I’ll incur within the next 3 months like vacation expenses, home purchases, etc.
It also includes the total amount of taxes I’m forecasted to pay in the following year on salaried income as well as estimated capital gains (if applicable) on any stocks I own
I also leave an “Other” line item to account for things I may have missed
I don’t include things like equity appreciation on my home in this snapshot because it’s not liquid. (It’s up to you if you want to include your down payment in this snapshot because that’s technically an asset, but again, it’s illiquid). And note that even though retirement is included in one’s net worth, I don’t include it here because it’s unlikely I’ll withdraw early and pay the 10% penalty.
This format is only a suggestion. The purpose of creating this spreadsheet is to help you understand if you have more income coming in each month than going out, and if so, what that specific amount is and how you can start investing and/or saving it accordingly.
I caution you that maintaining this Excel sheet is manual. So I recommend updating this monthly. It will require you to log in to each of your accounts (which I don’t mind doing because it enables me to screen for any abnormalities).
Have you tried doing something like this?