Where are you financially?

This is the third installment  in My Second Million series.

   Before you can get where you want to go, you first need to know where you are. One quick way to do that is to determine your net worth. I recommend that you do a rough and simple net worth calculation.

   Write down and add up your assets: home, vehicles, retirement accounts, checking, savings, etc. You can even add the value of antiques and jewelry if the item is valued at $500 or more. I do not add values of life insurance policies or accounts dedicated to college funding, as this is not my money. Life insurance is for your heirs, and school savings is for your children.

   Then write down and add up your liabilities: mortgage, car loans, credit card balances, student loans, etc. Now, subtract your liabilities from your assets. The result is your net worth. It can be large, small or even a negative number. The larger the number the better but don’t worry too much if it’s negative. Persons just starting out will usually have a negative net worth. They have had little time to build assets and could be settled with mortgage and student loan debt.

   OK, so now you know your net worth – now what? Now you know where you are. You can begin tracking your progress. I recommend you recalculate your net worth at the end of each month. This will show you your progress. You want this number to grow. Guess what? Life happens. Your car might break down, your furnace quits, the stock market dives, or some other emergency occurs. Your net worth will be impacted, so don’t get too upset if it doesn’t grow every month. How does your net worth grow? Simple, when debts go down and assets go up.

   Now where are you going? That is a question best answered by you, but at least you have a starting point. You also have an overall picture of what your financial state looks like. It is easy to lose track of where you’re going without this picture. Knowing where you are also gives you a sense of control. Regardless of the value of your net worth, you have the power to determine your future. You do this now without even thinking about it, use this knowledge to improve your financial fitness.

   If you don’t have an emergency fund, start one now. Put away just $40 every paycheck, if paid every two weeks. It is best to set up recurring automatic transfers into a separate savings account. Your emergency fund account will have $1,000 in one year. This is for emergencies, such as car repairs and home repair emergencies. Redecorating the kitchen is not an emergency. Vacationing is not an emergency. Birthdays and Christmas are not emergencies.

   Great online places to save your money are listed below. This is not an all inclusive list and rates change quickly. These online banks are FDIC insured, which protects up to $250,000 per depositor per individual account until Dec 31, 2013. If no federal intervention occurs, the extension expires and the coverage reverts back to $100,000 on Jan 1, 2014.

Ally Bank 1.44% APY
FNBO Direct 1.40 APY
HSBC Direct 1.35% APY
ING Direct 1.20% APY
Emigrant Direct 1.10% APY

    May your net worth grow throughout the year. Take care, stay well and be safe. 


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s