Yes, you can start today!

One of the most common questions I get during speaking engagements is about how to get started. What can they do today? In other words, is there a simple first step to build wealth?

Often I ask my audience is to think about their current wealth – the difference between what they own and what they owe. Their faces give them away. It is clear that most of them have never thought about that number. They know the amount of their pay check, and some of them know the value of their debts or some of the things they own. But they haven’t put it together to know their actual wealth. Wealth is often called net worth, but many would take the position that our net worth is more than just the sum of our finances. So let’s call the number our Wealth Number.

There are lots of numbers to look at…

When people talk about getting rich, sometimes they talk about the stock market and spend time watching it go up and down. Often every few minutes on their smartphone, leading to unnecessary mood swings. Others set up a budget and try to track expenses, leading to spirited spousal arguments about who caused the biggest budgetary miss, or can one partner claim a credit for the savings from a 1/2 price beer and wing night? (answer: no) Some focus on paying down a debt, even as new debts spring up like bad weeds. As a result, they build frustration, not wealth.

While all of these numbers can be helpful, the most important is your overall wealth number. The difference of what you own minus what you owe. To calculate it, set up a simple table with everything you own at the top. Include things with real value, like a house, cottage, car and registered investments like an IRA, 401(k) or a 529 Education Savings Plan (or TFSA, RSP and RESP for my Canadian friends). Add up everything you own. Then make a section below that for everything you owe. Mortgages, student loans, car loans, and the line of credit you took out to pay for the dog’s new hip. Sum up the debts, everything you owe. Finally, subtract what you owe from what you own. This is your Wealth Number. You can do this on a cocktail napkin, in a spreadsheet or download the Net Worth Tracking Sheet here.

OK I have a wealth number, so what?

That number is a simple first step to building wealth. Why? What does the number mean? It is a measure of your financial wellness. Once it is big enough, your money can make enough money to take care of you. How fun is that? If the number is small, you may have a lot of debts that are cancelling out the value of the things you own. The monthly interest costs of those debts are pulling you backwards. If the things you own, like real estate and investments are growing, they are pulling you forward and helping you to build wealth. Sometimes people face a negative wealth number. Their debts overwhelm what they own. They need to work hard just to cover the interest on all their debts. Not fun, but solvable, read on.

What gets really interesting is tracking that wealth number each month to see what it is doing. If it is rising, you are moving in a great direction. If it is stagnating, or worse, declining you will be able to retire, well, never. Set up your cocktail napkin, envelope back or spreadsheet to track it every month and see what happens to it. Look as well at the sum of what you own. Is it rising? Awesome, how can you make it grow faster? Look at what you owe. Is it falling? Is there a way to pay things down faster? If you have an addictive personality, thinking about this will get your finances in shape just like your Fitbit or Apple Watch force you to get moving on your health.

Tracking your wealth number changes everything

Your wealth number is the simple first step to building wealth since it changes the way you think about money. The act of calculating it every month helps you build awareness of whether your wealth is actually growing. Updating it will take about 30 minutes a month using your paper or online statements. You got this.

Tracking your wealth number makes you start to think about the things you own:

  • Are my investments growing?
  • Am I getting value for the investing fees that I am paying?
  • Can I own more investments that will grow and build my wealth?
  • Have I bought a lot of things like cars, clothes and dinners out that lose value and lower my wealth?
  • Are there ways of lowering costs on the expenses that I pay for every month?
  • Can I use that freed up money to invest and build more wealth?

It also makes you think about what you owe:

  • Can I find more savings and use that cash to pay down debts more quickly?
  • What are the interest rates of all of my debts and which ones should I pay down first?
  • Have I been borrowing money to buy things that go down in value? (a double threat since the thing loses value every month, and lowers what you own, but the interest costs slow down your ability to lower what you owe)

Show me an example

Here is an example of tracking wealth. Interesting to lay it all out there. Be brave, you can do this at home. Looking at the green section, the house and 401(k) are moving up nicely, while the two vehicles are losing value each month (I depreciated them at 15% annually). Still the Total Owned is rising and slowly building wealth. Unfortunately, rising credit card debt in the orange section is working against the pay down of the mortgage and the car loan, as a result, the Total Owed is staying about the same and wealth is rising only slowly each month. Depressing.

Let’s try making a few changes and see what happens:

In this case, we have increased the 401(k) contributions by $200 a month, which will cause it to accelerate its growth over time. On the credit cards, we have curtailed spending and paid down each card balance by $500 per month. As a result, this family’s wealth is now growing by more than $4,000 a month and will accelerate as the investments grow and debts shrink. Nice!

Wait, where did the money come from?

It came from getting smarter about monthly costs and aggressively reducing monthly recurring expenses using ideas from Cashflow Cookbook where I lay out ideas to reduce monthly expenses by up to $13,000 monthly with minimal effort and sacrifice and from my blog posts. Lots of other blogs have great ideas including Barry Choi’s Money We Have and the classic, Mr Money Mustache. Some of the savings come from being smarter about spending, sometimes its about learning the joy of having fewer things, letting the Jones pull ahead and staying out of malls. Once you start tracking your Wealth Number, you will begin to find lots of ways to reduce expenditures and apply the savings to building the investments you own and reducing what you owe.


To build wealth, start by tracking your wealth. To accelerate it, focus on ways to free up monthly cash flow and immediately use those savings to pay down debts (especially high interest ones) and increase investments. Over time, what you own will accelerate and what you owe will drop. Work becomes something you do for fulfillment, bills go on autopilot, stress dissolves and life is fun. Welcome to financial wellness.


  1. Hi Gordon, how are you calculating the monthly increases in the house value? Thanks, great post!

    • Gordon Stein Reply

      Thanks David – great question. I used 3% growth annually, then divided by 12 months to give 0.0025 of growth each month. Use what every makes sense as a long run historical average for your area. Once a year or so, you can true it up to align with how the market is actually doing. Its not an exact science, but home equity is a real asset that you can sell or borrow against. All the best!

Write A Comment