Hi, I’m JJ Childers and welcome to another installment in the Monday Morning Mentor series. Our focus has been on the importance of establishing a plan for your personal finances. This week we’re going to take a look at the next step in that process, taking stock of your current situation.
In order to ever really get anywhere, you have to know where it is that you’re going. We took a look at setting our financial goals last week so now it’s time to determine our starting point. This is vitally important because it gives us a measuring device for determining what type of job that we’ve got ahead of us. For instance, if you took the first step and established a goal of attaining a $1 million net worth, we now need to find out how much will be involved in getting there.
In this step, you need to assess your current situation. One aspect of this is to put together a financial statement. This is easier than it may sound but it’s something that many people have never done or they fail to keep one current. To create a current financial statement for yourself, all you have to do is to run a couple of simple calculations on your assets and liabilities.
The first step is to add up all of your assets. These will include the value of your home, your vehicles, and any other valuables that you have. Be sure to include the amount that you have in your bank or brokerage accounts as well as any retirement accounts. Once you’ve done this, add up all of your liabilities. This will include any mortgages that you have on your real estate or balances that you still owe on anything that you’ve financed. Don’t forget to include credit card balances in this calculation.
To find out your overall net worth, simply subtract the total of all of your liabilities from the total of all of your assets. This will provide you with your net worth. Let’s say that this amount totals up to $150,000 as an example. If you set your financial goal at a $1 million net worth, you now know that you’ve got $850,000 to go. This may sound like a large number but it’s one that can easily be attained.
