Thanks for hanging in there with me on my short absence. My mom is doing better and things have stabilized for now.
This post will be a continuation of the previous post titled Personal Finance Basics Part 1 – How Do I Get a Handle On My Money. In this previous post I talked about what FI means, how to calculate your FI number and then gave you 2 assignments.
- Add up all you debt (I mean ALL of it)
- Make a list of the 10 things that make you happy
If you haven’t done these 2 things yet, stop here and do them now.
Your “10 Things” List
Were there any surprises on your “10 Things” list? Did you have a hard time making the list to begin with? You may not think you deserve to be happy or that happiness is just not within your reach. I want to tell you that these ideas are false. You can be happy.
I’m using the term happy, but really, this is joy…joy in the Lord. I’ll write about that in a future post. God gives us all we have and His desire is for you to experience joy.
May the God of hope fill you with all joy and peace in believing, so that by the power of the Holy Spirit you may abound in hope.Romans 15:13
And, the idea that happiness is not within your reach is also false. In the next few months, we will work through all the steps you’ll need to get your finances on track and be able to tackle that “10 Things” list!
So, how about surprises on your list. You might have discovered some interesting things about yourself or your spouse. One concept that may have appeared is, not everything on your list requires money or at least not large amounts of money. You may have discovered you can be content and intentional with life and relationships and sometimes, that doesn’t cost anything!
Your Net Worth
Now, let’s put that debt number to work. We’re going to create a Net Worth Statement. This is a simple statement that lists all your Assets and Liabilities. Assets are what you Own and Liabilities are what you Owe. The difference between the Total Assets and Total Liabilities is Net Worth.
Why do a Net Worth Statement
A Net Worth Statement gives you a snapshot of your financial position. This information is useful in creating a financial plan or understanding more about your financial health. I know many people who don’t know how much they owe on their mortgage, how much they have in savings or even where some of their assets are. Don’t be one of those! Be informed about your finances.
How to Create a Net Worth Statement
A Net Worth Statement is easy to create. This can be done with a blank sheet of paper and a pencil or with a spreadsheet. If you are doing this on paper, simply draw a line down the middle of the page, title one column Assets and the other column Liabilities. List everything you own in the Asset column and everything you owe on the Liability column.
You’ll need to gather information about what you own, such as the value of your house and cars, similar to how you gathered all your debts earlier. I had you start with the debts or what you owe first because those are usually more time consuming and it’s a more emotional exercise.
If you are a spreadsheet person, you can create your statement with a spreadsheet similar to the one below. I have created a sample spreadsheet that will give you an idea of the categories you might need. Even if you are creating this on paper, look at the categories for ideas of the kinds of numbers you’ll need to gather.
There are many Net Worth spreadsheets available online. You can use this one or find another that fits your style better. Remember, one size does not fit all!
Plug in all your numbers or list them on your paper. When you are finished, add up the Asset column and then add up the Liability column. Take the Total Liabilities and subtract them from the Total Assets. (or let the spreadsheet do the math for you).
Is your Net Worth number positive or negative. If positive, this is your Total Net Worth today. If the number is negative, we’ve got some work to do!
This is my Sample Net Worth Statement Spreadsheet. If you would like to use mine, click the link below the picture of the spreadsheet, save a new copy for yourself and you are ready to go.
Assignment and Key Takeaway
Assignment – Gather all your financial data and create you very first Net Worth Statement. If you already have one, make sure it’s up to date.
Takeaway – Be informed about your finances. Don’t depend on someone else to protect and track your money.
In Part 3, we will learn how to do a Monthly Budget