If you asked me what was the most important item you should do to track your financial health I would tell you to track your net worth. A net worth statement is the most powerful tool you can use to track your financial progress over time. This simple one page document represents the sum of all your financial decisions over time. There’s no hiding with good intentions on a net worth statement. Ultimately, I think, it reflects what you value most.
Organizing Your Financial Resources
Now that Bill and Sally have dreamed big and identified their needs, wants and wishes for retirement, it’s time to see what resources they have to work with.
This week, we review their cash flow (income sources and expenses) and create a net worth statement to see their assets and debts.
If you’ve signed up to plan alongside Bill and Sally, here are your action items for the week. (Haven’t signed up yet? See the bottom of this post.)
Here Are Your Action Items for This Week:
- Make sure to listen to the episode. I review your comments and walk through Bill and Sally’s financial situation.
- Review Bill and Sally’s cash flow summary and net worth statement. This will give you a snapshot of what the end result can look like.
- Watch the short video. I walk you through each step of identifying your income sources and creating your net worth statement.
- Complete these worksheets. It might take a little homework to get the estimated value of your social security, pension, assets and liabilities but it’s worth the effort. Your net worth statement will be the key document you use to track your financial life.
- Estimate future retirement income sources
- Build your net worth statement
- Manage your current lifestyle and cash flow
Challenging Questions of the Week:
- Should they pay off their car loans? Why or why not?
- Should they contribute to ROTH IRAs? Why or why not?
- Are they saving enough? Why or why not?
Respond with your answers here.