Money Walks

On my last post, I talked about the importance of setting your goals and as with any road maps, before you can determine how to get from here to there you need to know where “here” is. In other words, where do you stand financially? This is where the net worth statement concept comes into play.

The net worth statement is a very simple concept, it is a snapshot of your financial health. To break it down, your net worth is the difference between all the things that you own of value and all the debts you owe. In other words, it is your total assets minus your total liabilities.

So why do we need a net worth statement?

Net worth statement gives us a snapshot of your current financial condition, basically, tells us how we are doing financially at this moment in time. This is important and you need this information in order to effectively set the financial goals that you want to work towards, determine your progress along your way, and make adjustments, also why it’s important to update your net worth on a regular basis. Your net worth will also come in handy when you decide to apply for a mortgage, credit cards or any types of loans.

How to prepare your Net Worth Statement.

Not having a strong grip on your financial situation can really hurt you in times of need, like a job loss or health emergency. It’s really hard, if not impossible, to plan for your future if you don’t know where you are today. So lets start making you your Net Worth statement today.

You can begin by taking out a piece of paper and start listing all the things of value that you own. Include everything, even those you still owe money on like your house or your car, etc. You want to use their full values as of today. Don’t worry about the balance of the loans related to these assets, they will be included in the liabilities section so your equity in the assets you list will not be over looked. However, for your bonds, stock options, and retirement accounts, use your current value and not the value at maturity or the value on the date you’re fully vested. For this portion, you should talk to your broker/employer and ask for statements showing the current value of these accounts.

For life insurance policies, you should only list those that have a cash value. Majority of life insurance policies are provided through the employers and are terms policies good only for the time that you are working for that company, so these are not considered assets.

For cars and all other vehicles, use the Kelley Blue Book value, which is the estimated price of the vehicle if the car were to be sold to another consumer or a car dealer. For every other assets, use your best estimate of the fair market value.

So here is a general list of some common assets sorted by category:

Cash Equivalents: Banks and money market accounts, CDs, and Cash on hand.

Investments: Stocks, Bonds, Mutual funds, Index funds, Savings Bonds, and Stock Options.

Retirement Funds: 401(k)/Pension funds and IRAs.

Real estate: House, Land and Rental Property.

Personal Property: Vehicles, Campers and RVs, and Boats.

Household Goods: Furniture, Jewelry and Electronic Equipment.

Money Owed to you: Rents due to you, Rental Deposits, Utility Deposits.

Other Assets: Life Insurance, Privately owned business.

So now that you’ve listed everything you own that has a monetary value, in order to get a true representation of your financial net worth, we’re also going to have to list money you may owe banks or other finance companies, also known as liabilities.

Some examples of Liabilities include the following:

Loans: Mortgages, Home Equity Loans, Vehicle Loans 401(k) Loans, Student Loans.

Credit Cards: Visa/Master Card, American Express, Discover, Department Store Credit, Gas Credit Cards.

Taxes Owed: Real Estate Taxes, Unpaid income taxes, Quarterly Estimated Taxes.

Other Debts: Unpaid Bills, Alimony, Child Support, Miscellaneous.

After you have listed everything you can think of, then you have to total up all your assets and liabilities. Now subtract your liabilities from your assets and that is your Net Worth. If your number comes out to be positive(assets are greater than your liabilities) then congratulations, you have a positive net worth. If your number is negative (liabilities are greater than your assets) then you have a negative net worth. If you have negative net worth, don’t let this discourage you. At least now you know exactly where you stand and can finally map out your route to a positive net worth. Now that you have your Net Worth, our next post will concentrate on deciding what your goals are and how to get started.

(This is the second article of the three part series)

[photo]

Personal Finance is such a big fuss in our blogosphere, there are so many articles on how we can save more for our retirement, how to reduce debt, how we can live more frugally, how to not spend your money, and the list goes on and on. I love to read about all the different aspects of finance, because the truth is the more you think about finance the better you’re gonna do financially.

But after applying all the neat hacks and tricks on how to be more financially independent, what’s next? How do you determine financial success? How do you gauge your performance? It’s simple. It’s not how much credit card debt you were able to pay off this month, its not how much you were able to save up, it’s not how much you were able to put away for retirement.

What it comes down to is, your net worth.

You can put away $500.00 for retirement one month but in that same month treat yourself to a nice Iphone (which is somewhere around that price range) and not improve your overall net worth. You can pay off $200.00 off your credit card this month but you keep using the same credit card for all your purchases, again, you’re not improving your situation.

The way you can gauge your financial performance and know that you’re doing good is this, ask yourself, “Did my net worth improve from last month”? If you can say yes, then you’re doing wonderful, if not you might want to rethink your strategy.

What you don’t want is for you to have the same net worth month after month. As long as you can say that your net worth has increased by ‘x’ then you’re in good standings because you know that your making progress. As opposed to someone whose net worth is the same each month and not making any improvements, which is the most case. If you spend just as much as you save, then you’re really not making anything. Wouldn’t it be great if you can see that your net worth is getting better and better each month, each year? Instead of being in the same financial scenario for 5 years? This is why keeping track of your net worth is very important because it also allows you to keep track of your financial progress.

The big picture is aside from all the frugal living, putting away for retirement, investments, and all the financial goals one might have, what it comes down to is are you improving your net worth.

The key points is, you should concentrate on improving your net worth month after month. This is the only way to rate your performance. If your net worth is improving, then you know your financial situation is improving.

[Photo Credit]

Wow that was a nice spring break. Boy did that week go by super fast. Speaking of which, this whole year is going by super fast. I can’t believe that it’s almost April! Where did this last 4 months go? Well anyways, I know I haven’t been posting for a while but I should be able to get back on track now that midterms are over and I have more time

Good news: Today I finally got my taxes done!  And boy was I disappointed(still good news).

So here’s the verdict. Last year I made about 25k with two jobs and paid a little over 5k in taxes.  Five thousand US dollars! I was thinking, “man…I’m gonna have a really nice refund this year, I can finally take my girlfriend out to a nice dinner”. I was wrong. It came down to me OWING the state 104 dollars and getting a refund of 600 dollars from federal. The bright side is I get something back, but I was expecting that something to be more like 2k or something. I mean I paid 5k so 2k sounds reasonable right? Overall, after subtracting the 100 bucks for the state balance, I’ll be getting about 500 or so. Better then nothing eh?

Bad news: I’m still in debt. And doesn’t looks like I’m gonna be debt free within the next month

With all the recent bills tackled onto my credit card, looks like I’m back where I was in February. My credit card is back up to a little over five thousand dollars again. Here’s the lineup for what’s been slowing me down:

• Six months of auto insurance
• Last 3 months of cell phone bills
• Membership fees
• Grocery/gas
• Car maintenance

So all that has put me back up to a total of $5,404.22. I do have some incoming cash so I think I can knock it back down to about 3-4k. My goal is to get this whole thing paid off before summer starts. I would love to start my summer off being debt free.

I want to remind everyone that the last day to file your taxes are April 17th so if you haven’t done so get them done!

Last month went by so fast, I can’t believe it’s already February. So right now, I think I’m in good standings as far as my credit cards goes. I will have that paid off hopefully no later than the end of this month. Then when I get my debt straightened out, I can finally start up my investment portfolio. I’m still in the researching phase, so I’m not quite sure what funds I want to invest in yet but any comments/suggestions are always welcome.

Okay so up to this point, I currently have 3704.61 dollars left on my credit card. I haven’t been able to pay off much this month because I’m currently not working and still haven’t received my refund checks. To sum it up, here are my ups and downs for this month.

Ups:

1. I started working today again at my job. I can finally start getting consistent checks every two weeks.
2. I cut down on my spending and lowered my phone bill from 70 dollars a month to 55.
3. Had a talk with my insurance agent the other day and was told that my insurance should go down when I renew it in May. Apparently this upcoming March-May time frame, some of my previous accidents and tickets are supposed to go off my record. (Happens every 3 years).Right now I’m currently paying 467 every 6 months and I’m hoping it will go down to maybe 375-400.
4. I saved about 300 dollars last week from a friend I know who works at an auto shop and he did a major tune up for my car which would have cost me about 450-500 dollars anywhere else. Only paid for parts and not labor, Thanks Jimmy :)

Downs:

1. Made no income this month
2. Had to spend money for 4th year anniversary dinner. 
3. Tomorrow is gonna cost me 315 dollars to get my driver side rear windshield fixed.

So I got 4 ups and 3 downs, I’m still up right? Anyways, I am going to make two goals for this month.

1.  I want to get all my credit card debt paid off by the end of the month.
2.  Finally start my investment portfolio.

These two goals are realistic and challenging. I’ll keep you up dated.

I’ve been hit with some unexpected blows this month that will probably pull me away from meeting my goal to get debt free by Feb 26th. It sucks to say but looking at my situations realistically, I’m looking at pushing my goal two months back. But who knows, I might still have a shot at making it by the 26th if my tax return ends up being really nice to me. Anyway, two reasons for my set backs:

1. My first hit came from my work. The way things are looking, I’m not going to be working at my main job again until sometime in May. Now this affects me because the goal date was made based on the flow of my current income and so without it, the caluclations is going to be off. However, when school starts back up I will still have my on-campus job which should help me. I expect this hit to cost me about a month and a half.
2. Now with me not having a job until school starts, I will be completly free and in return will make me spend more than I usually do just to get out of the house to stay busy. This is my second hit. I’m not the kind of person who likes to stay in the house all day and do nothing but watch T.V. With my time off, I will probably be hanging out with friends, who are all about going to places and spending money. I am expecting this hit to cost me about half a month.

So overall, I’m thinking it’s going to set me back about two months.

Now enough of the bad news and on to some good ones.

1. I just got my refund check from my school, which was 1325.00. This will all go towards my credit card debt and will bring it down to 3704.61.
2. I did not spend no where near as much as I had expected for Chirstmas gifts so that saved me about another 200 dollars last month.
3. I just found out that my friend who owes me money will be able to pay some of that back, which was something that was not in my “expected income” list.

As of now, my debt meter went from -$5029.61 to -3704.61 and I am expecting it to be hitting somewhere around the low 3,000.00 by the end of this month. Still not bad for someone whose unemployed, I think. 

Oh man, Thank God Christmas shopping is over and done with. So I was one of those last minute shoppers and waited til the last minute and did my Christmas shopping on the 24th and let me tell you…it was no fun. I ended up spending $334.11 for christmas gifts, which was still under my original budget of $400.00 but probably could have saved about 50 bucks if I wasn’t so much in a rush. That’s why it’s a baaad idea to wait til the last minute.

Anyways, so there was a huge mistake in my countdown counter. For some reason, my counter was set to go off a month later than I had set it so there’s actually 62 days left in my countdown for getting out of debt. I was looking at the counter and thinking to myself it didn’t look right so that’s how I caught the mistake. Although the counter was set to go off a month later than what I wanted, it shouldn’t make a difference using my original expected goal date, Feb of 26th, because I had made the goal date based on the date veruses numbers of days left.

So here are the stats for this past week: I was able to pay off a nice round sum of 500 dollars and now I am currently at -$5029.61, which looks a lot better than my previous balance of -$5529.61. However, I will not be able to pay off much of anything next week because I will miss out on a weeks worth of paycheck due to my trip to Florida which will be from the 25th of December to the 3rd of January. I should still be okay though. After my two refund checks of $1400.00 comes in, I will be back on track ;D