#20 How Much Fuel Is In Your Tank? (Building Block 3)

Why does your car have a gas gauge?

Gas Gauge

Seems obvious, doesn’t it? As we’re heading down the road, we need to know how much fuel we have in the tank. If we have a goal (say, getting to the grandparent’s house for Christmas), we need to make sure we have enough fuel to complete the trip. Gas isn’t the goal, but it’s a means of achieving our objective.

It’s the same with our journey down the road of life. Money isn’t the goal in life. Rather, it’s the fuel that lets us achieve our goals. It’s best to know if we have enough fuel in our tanks to achieve our objectives. If not, we need to find a way to either increase our fuel or change our goals. To complete the analogy; In life, we spend our working years filling the gas tank, in order to have sufficient fuel in the tank to draw it down as we move toward our final destination in retirement.

In Part 3 of the Building Block Series, we’re going to focus on what I believe is the single most relevant “Gas Gauge” on your journey through life:

The Net Worth Statement

Simply put, the Net Worth Statement is simply a measure of your total assets minus your total liabilities. Put another way, it’s a measure of what is OWNED vs. what is OWED. An simplistic example of a personal Net Worth calculation is below:

Net Worth Template

For your benefit, I’ve created a Net Worth Template You Can Use Today!!  (Just make sure to go to “File / Make A Copy” to save a copy onto your drive to allow you to make changes).

I cannot reiterate strongly enough the value of tracking your personal net worth. I started tracking my family’s net worth in 1991 (at the young age of 28) and have tracked it every year-end since that time. At the time, I was just getting started in my interest of personal finance, and had read an article (similar to this one?) about the value of tracking net worth.

I decided to give it a try, and have never regretted that decision.

Every year in January, I simply type in the figures from my year-end statements from all relevant accounts. It takes minimal time, and by the time the last statement rolls in you have an updated net worth figure.

The value of the net worth statement is that it allows you to see your personal financial trends over time. Every decision you make through the course of the year will either increase (more savings) or decrease (more spending) your net worth. It’s encouraging to see the net worth grow year over year, and know the decisions you are making on a daily basis are resulting in real improvement in your financial situation. Your gas tank is slowly filling, and you can see the progress in your Net Worth statement.

Another advantage of going through the process of updating your net worth is the high level review of all assets you own, and all debts you owe. It’s a useful time to review the investments you have, and whether any changes should be made. While there are numerous web sites now offer automated Net Worth calcuations (e.g., Personal Capital, Mint), I still find value in updating my spreadsheet once a year.  It’s also a good means of communicating to your family the assets you own, and would be a critical document for your loved one should you pass away (see Post #19 – Mortality).

Another interesting advantage of knowing your net worth – you can compare yourself to others. The following data from the US Census Bureau shows the median net worth by age. Data is shown with, and without, home equity.

Net Worth Comparison

I would argue that the median net worth is far from sufficient to fund an active retirement, but it’s an interesting comparison to see how you stack up. The following article is the source of the chart, and gives additional commentary on the net worth data.


Knowing your net worth is a key building block that all households should track. It helps keep you on track as you “fill your tank” through your working years, which is a fundamental requirement in your journey toward achieving a great retirement.

If you don’t have a personal Net Worth statement yet, I encourage you to copy this template and calculate your own Net Worth today.

How much fuel is in your tank?


  1. I agree. I’ve found the net worth statement invaluable. It give’s a great framework to make a spending/investing decision within your entire financial picture.

    Another BIG benefit is it cuts through all good intentions and shows you in black and red the results of all of your spending decisions.

    1. Thanks, Roger. I value your opinion (and LOVE your podcast @ The Retirement Answer Man) and consider it an honor that you’re following my blog!!

  2. Hi Fritz;
    How would you figure a pension into the Net Worth calc? I have a military retiree pension of approx $3k/month ($36k/year COLA adjusted yearly)…I used the 4% SWR as a way of reversing the value of the pension much like I would with an investment portfolio to get an idea of what equivalent Net Worth would produce this income and came to $900k for a nest egg kicking out $36k/year… Is this logic sound when calculating my NW along with all my other standard assets??? Enjoy your stuff – do more podcast interviews if you can!!
    Regards from Florida,

    1. Hey Recce,
      Great question, thanks for taking the time to ask it! I, too, have a pension (and consider myself lucky to have it!). You could use a Net Present Value approach (sounds like that’s what you’re doing, in essence), but I take a different route. I EXCLUDE my pension from my NPV, but I use it in my retirement cash flow planning (see this link).

      Summarized, if you need $5k/month to live in retirement, and your pension covers $3k, you need the assets on your Net Worth to fill the $2k gap (at <4% withdrawal rate). You only need to look at the gap you're trying to cover, which is why I exclude the pension from my Net Worth. Hope that makes sense!

      Thanks for your kind words, glad you like the podcasts!! Someday, I may just launch one….it's a seed, but not sure I want that much of a time commitment (yes, I do have a life to live outside of The Retirement Manifesto!!).

  3. I’ve also been tracking my net worth since I was 18, and it makes a huge difference knowing what it is and seeing it grow. I would say watching it grow is some of the best motivation toward financial independence. I go by quarters now and I try not to get too fixated on the number, and I focus more on the fact that the overall picture is going the right way. 🙂

  4. Our net worth statement is pretty skewed because we bought our home at the bottom of the market and it has since more than doubled. Makes for really awesome numbers on paper, but less helpful in terms of a final net worth goal since we don’t ever plan to sell.

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