|where are you now in your financial map?|
The same case in our finances, if we made a goal and wanted to reach it, the first that we must do is to find your current standing. Doing this, we can find what are the things that we must do in order to move forward.
However, most of the time people doesn't even know their current financial status. Worst, most of the people who said they wanted to improve their financial status are often turned off and procrastinated in computing their current net worth thus they can move forward with their plans. Below are the things we must know to find where we are in our financial map:
List all your asset from the most liquid down to the least. Cash will be on top followed by assets which can be easily sold or turn into cash. Properties can be included in the list (usually in the bottom) but the value should be estimated based on how much will you get if you sold it. Be realistic in doing the estimate and expect the worst case amount that you will receive if you sold it. Also, estimate the value growth rate/depreciation rate of each asset. This will give you an idea on which asset is important in wealth-building.
2. Total Debt
List all your debt from the highest interest rate down to the least. In paying debt, the priority should always be the one requiring you to pay the higher interest. Delaying these high-interest rate will increase your debt level faster.
3. Net Worth
Once total assets and debts are defined, computing the net worth is easy:
Net Worth = Assets - Debts
Once the above-mentioned are defined, you already know your starting point to find your way in your financial map. Re-evaluate occasionally to avoid getting lost.