Your Current Financial Picture
I recommend starting off your new financial journey by taking a major assessment of where you stand financially. Be prepared to pull out financial statements and any other documents you might need to get a complete financial picture of your life. Credit card balances, checking account, investment account, 401(k) statements, pull them all out. If you’re already a well organized person than, this shouldn’t be too difficult for you. If you’re unorganized, take this as an opportunity to get organized.
What we need to do is get a clear picture of the following things:
- How much debt do you owe? Any high interest debt?
- Do you typically spend more than you earn?
- What kind of investments do you have? What other assets?
Additionally, a good exercise to do is to do a ballpark estimation of your total income over your life. You can get as detailed as you want, but you can use old tax returns and other documentation. Find out how much money you figure you have brought in since you started working however many years ago. Then, calculate your current net worth. By doing this, you are able to see what you essentially have to show for all the income over the years. For some of you, this will be depressing, for others, encouraging. The point is to motivate you to take the necessary steps to increase what you have to “show” for your work. It’s time to boost your net worth and your savings.
Establishing Goals
After getting a clear assessment of your financial condition, it’s time to set some goals. Where do you want to be in 5 years? 10 years? 25 years? It starts today in order to reach your goals. Take your long term goals and break them up into clear, action-oriented steps or short term goals.
Your game plan is specific to you, your family and your financial situation. There is no blanket financial plan for everybody, so take the necessary time to think it through and get something down on paper. Lastly, your financial plan is not set in stone. It should be tweaked and modified over time as things change. It is a fluid plan.
Jump To Another Step In This Guide:
- Step 1 – Assess Your Situation & Set Some Goals
- Step 2 – Get Out Of Debt
- Step 3 – Smart Money Management
- Step 4 – Boost and Diversify Your Income
- Step 5 – Reduce Housing Expenses
- Step 6 – Make Your Money Work For You
- Step 7 – Protect Against Inflation
- Step 8 – Invest In Cash Flowing Assets
- Step 9 – Pursue Complete Independence
- Step 10 – Make Incremental Improvements
