You should be treating your finances the same way a business does. The first document every successful business uses to track it’s health is a balance sheet. Why? If you give this document, to any financial advisor, they will be able to tell in 60 seconds your exact financial position. Your primary goal is to grow the number at the bottom of this document.
This number is the equivalent of your location on the map. At the bottom of this document is one number.
Net Worth is the single most important indicator of financial success and the basis for any financial decisions you make. Your goal should be, at a minimum, to increase net worth on an annual basis.
- Total all your assets (house, car, investments)
- Subtract your debts (mortgage, car payments, loans, credit card balances)
- Track monthly to see progress.
- Calculate with and without your primary residence value. Justification is that you have to live somewhere.
- Track over multiple years to evaluate progress. Allows you to see the trend and project future progress. Track monthly and yearly.
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