Personal Finance & Net Worth

How to get your personal finances sorted has got to be one of the most boring blog posts I’ve ever done, but it’s one of the most important first steps for anyone and everyone to take. So we’re going to look at what you can and should do right now, before you worry about any other aspect of investing or finances.

It doesn’t matter if you’ve been investing for decades or if you’re brand new to all of this. Going through this process will have a huge benefit for you. Some of you will already be doing this, most won’t. Hopefully by the end of this, all of you will!

I’ve been doing a personal Net Worth Statement once a month, every month, since 2006. It’s sad I know, but it’s allowed me to keep on track to reaching the goals I set for myself. And notice when I’ve started to get lazy, greedy, and downright ridiculous – like that time I decided to buy a car worth 3x as much as the house I had just bought… oops

Net Worth Statement

Your entire financial life comes down to just Four Key Areas that make up your Personal Net Worth Statement. This is one of the oldest personal finance things out there, I’m not reinventing anything right now. It works and is incredibly powerful if you want to get from where you are now to somewhere else.

The point of this exercise is to know if you sold everything, cleared all your debt – how much money would you have? And at the end of the month, how much money will you have left over once you’ve lived your normal life?

If either number is negative, you’ve got some work to do!


What do you bring in each month?

Calculate what you’ve got coming in.

Your job, your side business, your full-time business, your interest on savings, dividends on shares, rental income on properties, sub-letting a room, child support.

Anything that puts money into your pocket each month or year.


What do you spend each month?

Calculate what you’ve got going out.

This is the one most people get badly wrong. So a few suggestions for you here;

  • List all of your Direct Debits and Standing Orders
  • Track exactly, and I mean exactly, what you spend over a period of at least one month, ideally three
  • Don’t forget annual expenses you might not have paid for several months
  • Include discretionary spending, things like holidays, clothes, shoes, hookers, etc.

Often people underestimate by a significant margin how much they spend on things throughout the period of a month. Usually small stuff like a morning coffee or that Pret lunch you always get.

Because I’m all about lowering barriers, if you want an easier way of doing it, then just use this instead – www.moneyhub.co.uk

There’s no affiliate link or anything, it’s just a product I personally use and have really liked. I think there’s a free version, but the paid for one is only £10 per year.

This links to all your accounts – mortgages, savings, bank, ISA, etc. and pulls all the data together into one place. You can then assign each transaction you ever make into categories, which then allows you to see how much you spend on eating out or book shopping.

You can even set yourself target budgets for different categories so you can see at a glance if you’re over or under budget for the month.


What do you own?

For the purposes of this, an asset is anything you own that has a real value if you needed to sell it.

The best kind of asset is an income producing one – i.e. something you own, with real value, that gives you money each month. Dreamy!

Be realistic with what your stuff is worth. Just because you paid £40k for your car, if you actually tried to sell it, what would you get?

Don’t take the piss here, no need to put £0.50 for each CD you own. Think more along the lines of stuff that you could sell for more than a decent chunk of change. That amount will vary depending on your circumstances.

To help, here’s a list;

  • Personal residence
  • Investment property
  • Shares
  • Bonds
  • Jewellery
  • Cash savings
  • Cars
  • Watches
  • Wine
  • Etc


What do you owe other people?

The most common liability people have is a mortgage. You owe a bank or building society a crap ton of money, and if you sell your house they will want that money back.

Car loans, personal loans, credit cards, pay day lenders, loan sharks, Granny who lent you some money, that bloke down the pub you owe a pint to, etc.

You get the idea.

Again, don’t worry about really small figures here. So maybe you left before it was your round, don’t put £15 for a round of drinks down as a liability (Yes, despite living in Cambridge, I’ll always be Northern and expect change from £20 if I buy a round – I’m constantly disappointed).

The goal is for your assets to be worth more than your liabilities. If they aren’t, eek! You have a negative Net Worth. You’re technically insolvent – i.e. if you sold everything you own, you’d be unable to pay your debts. Bad times.

But it’s not the end of the world, provided you can keep paying your debt, then you can earn you way out of the hole.


The whole point of this exercise is to give you a snapshot of your current financial health. By tracking it over time, you can see what areas need more focus, and where you’re letting money slip through your fingers.

Let’s take a worst-case scenario;

Low Incomings

High Outgoings

No Assets

Lots of Liabilities

Attack this scenario in stages.

  • Reduce Outgoings – take a hard look at what you’re spending on each month and cut out everything that isn’t absolutely necessary. Sorry, you don’t get to have treats at this point. Life is hard I know, deal with it.
  • Increase Incomings – time to get another job, or a better paid job, or ask for a pay rise, or start a side business. You need to bring your income up so that it’s at the very least covering your outgoings.
  • Lower Liabilities – it’s not as exciting as buying assets, but if you have unsecure debt (credit cards, loans) then these are usually the highest interest bearing loans you can get. Clearing these debts with the excess income you have will make life a lot easier.
  • Increase Assets – once you’ve gotten rid of your expensive debt, you can start saving each month and building up some assets. Might be just a cash savings account to start with, then maybe shares, then eventually a property. Doesn’t matter, so long as it’s bringing in money each month for you.


The aim is to have enough assets, producing passive income sufficient to meet your outgoings. At that point, you’re financially free. You no longer have to work to live. Yay for you.


Hopefully the key take-away for you is to just get started and going through this process. It’s not particularly fun, but it only takes about 10 minutes, so it’s worth the effort.

Using something like Moneyhub is a great way to shortcut the process as well, so I highly recommend signing up for that if you want the quick and easy way of doing it. You can track all four key areas using the app, and see at a glance how you’re doing. Alternatively, an excel sheet will be fine. Or if you’re like me, both!

So that’s it. It’s fairly straightforward once you get your head round it. By doing this once a month (recommended) / once a quarter / once a year – you’ll be able to watch where your money goes, and whether or not you’ve got a future of financial freedom, or a future of being broke and living pay cheque to pay cheque.

The aim of the game is to increase your Net Worth each month, and if it dips, to know exactly why and be able to confidently know whatever you spent the money on has been well spent – or at least really enjoyed.  

If more practical blogs like this are helpful, let me know in the comments and I can share similar stuff going forward. If you’re not already in my Facebook Group – then get involved and you can ask any questions you have there.


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