taking inventory

Taking Inventory

Getting your financial house in order is a goal that most people set for themselves. Of course, not everyone will gets things in order at the same stage in life. Like anything else, most people will do things when they are ready, not when some financial professional tells them to do so. Or they will decide to take action as a response to a life event. Here are a few examples. Let’s say you have a friend (who has young children and a spouse) that passes away unexpectedly. After witnessing that, you then decide to get serious about having adequate life insurance to protect your family. Or you have a co-worker who is getting well into their golden years but still HAS to work because they didn’t save/invest appropriately for retirement. Only then do you decide to start taking retirement planning seriously.

No matter your excuse or fear around financial planning, you must take it step by step. You have to crawl before you can walk and you must walk before you can run.

Completing a personal balance sheet is the “crawl” step that everyone should take. This document, which can be found pretty much anywhere on the Internet, is really easy to do. It’s going to require you to list everything that you own (assets) and everything that you owe (liabilities). And, with some basic math (assets – liabilities) you will be able to determine your personal net worth.

Taking this “inventory” enables you to focus on where you need to start as it relates to your financial plan. Plus, as you continue to move forward with your financial plan, this can serve as your barometer of financial fitness. The goal is to continue to grow your assets, while decreasing your liabilities.

Some experts will recommend that you update your balance sheet once a year. However, if you are the type that needs more frequent feedback, perhaps you should consider updating your balance sheet quarterly or twice a year.

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