Now what?

I’m sure the weekend seemed like torture as you were all anxiously awaiting the next post. 😉 After all the background information, you must be highly anticipating the post that can get you started on your own journey towards financial freedom, right? (I can dream, can’t I?).

So, where does one start? Well, where are you financially? Are you spending more than you make? Are you saving enough for your dreams and retirement? It’s hard to answer without knowing where you are today.

Enter the net worth calculation. Simply put, it is a snapshot of where you stand financially at a specific date. To calculate your net worth, you sum up all your assets, and subtract all your liabilities.

Assets are everything you own that has economic value such as cash and savings accounts, retirement accounts, pension plans, houses, cars, etc.

Liabilities are what you owe, either to a bank or to another person. These things include credit card debt, student loans, car loans, mortgages, lines of credit, etc.

If this is the first time you are doing this calculation, realize that this number can be surprising. Even shocking to some. This is the first step for you to start to fully understand your current financial situation and if this number comes out very negative, it can be very disheartening. But don’t give up hope. No blame, no judgement. Everyone has to start somewhere, and you deserve props for taking the first step. You can continue being blissfully ignorant to your financial situation, but there will come a time where it will bite you in the ass. I guarantee it. No time like the present to start.

So go home and start collecting all the information you have to calculate your net worth. Bank statements, credit card statements, etc. Some of this information can be gathered online if you do any sort of online banking at all. Try to get the most recent information possible, but do not let this deter you from doing the exercise. An estimate is better than not doing anything at all.

Find attached a sample excel file you can use (Net worth). Add/delete your own categories as necessary. If excel scares you, write this down on a piece of paper. Whatever floats your boat.

Couple quick notes:
– I personally don’t include the value of my car in this calculation; it will continue to depreciate and it is hard to estimate what this is worth. Who knows, someone may decide to accelerate instead of braking and destroy your car tomorrow. We all know how well guys drive. 😛
– For your house, I would use the purchase value as the asset value. You may want to increase this with inflation, but I would hesitate to use what you think your house is worth in today’s market. I err on the side of conservatism in the calculation of assets.

Don’t worry if this isn’t 100% complete. And you don’t have to show anyone this calculation. Well, your partner might want to know. Ideally, you would do this exercise together, but I’m sure there’s a hockey game on. Or Monday Night Football. Or Glee. Or… you get the idea.

If you have any questions about what other things should be included in assets or liabilities, please leave me a comment or fire me an email. If you get off your butt and actually DO this exercise, I would ❤ to hear about it! If you want me to keep you accountable, post a comment saying you’re in, and I will check with you in a week to make sure you do this step. I find that when I actually tell someone else that I’m doing something, I’m much more likely to do it.

Now you know what the first step of your journey is.

So, what are YOU going to do about it?


1 Comment (+add yours?)

  1. Trackback: Credit Score Sucks A**; Now What? « Vix's Money

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