The crucial first step in creating and achieving goals (financial and otherwise) is figuring out where you’re at right now. Before you can chart your course for that great new destination, you’ve got to know where you’re at right now. Before you can point your compass, before you can count the cost, before you can estimate your time of arrival, you need to know where you are. You need to know what you have and what you owe. You need to take inventory.
Inventory? Yeah, inventory. What you own and then what you owe, your assets (things I own) and your liabilities (amounts I owe). Good goals need to be measurable and the way we measure financial wealth is by net worth.
Where are you headed with this, it sounds kind of boring….
There are two ways to build wealth, two ways to increase your net worth:
1. Growing Assets (things you own)
2. Reducing Debt (what you owe)
You can’t manage what you can’t measure. By simply writing down your goals boosts achievement by 42% (Hyatt, 2018). Writing down what you own gives clarity to where you’re at so you can move forward with confidence from a place of knowledge.
Here’s a quick and dirty way to estimate the value of your assets:
1. What could you sell your home for today? You probably know what your neighbors sold their house for.
2. What’s the value of all your checking, savings and investment accounts?
3. What are your vehicles worth today?
4. What would you sell me all your other stuff for? Guns, jewelry, tools and antiques, are the biggies. The rest is probably worth little or nothing.
5. What else do you own and what’s it worth?
6. Add it all up and there’s your assets.
Next, let’s estimate what you owe:
1. What’s the remaining balance on your home?
2. How much do you owe on your vehicles?
3. Do you have any credit cards that are not paid off every month? If so how much do you owe on them?
4. How much college debt are you responsible for?
5. Have you co-signed for anyone else’s debt?
6. Is there anything else you owe to anyone for any reason?
7. Add up your total debts.
Your Net Worth is your assets minus your liabilities.
Now you’ve taken financial inventory. You know where you’re at. You’re in position to set a destination and chart a course. Let us know how we can help! The conversation is always a great one. We can help bring clarity, energy and wisdom to your situation.