So far we have discussed Your Stage of Life, Your Life-Style , Your Tolerance for Risk, and Your Responsibilities - four of the five steps in building your financial profile. Your Financial Resources is the fifth and last in this process
Your financial resources come down to three broad categories: your net worth, your cash flow and your other resources such as fringe benefits, Social Security and anticipated inheritances.
Adding your net worth is a vital element in creating a solid financial plan. You must know what all your resources are before you can manager them properly. As the saying goes: ‘Even if you know where you are going, a map is of no use if you don’t know where you are standing’.
Figuring your net worth also serves another purpose. It shows you how you’ve allocated your resources. For example, you may have invested most of your resources in various types of bank accounts or personal property – or may have put the bulk of your assets in the stock market.
Unfortunately, many people who after twenty year of graduating from the university can still remember their student’s ID number don’t have the slightest notion of how much they’re worth.
You’ll find a net worth work sheet here so you can add up your assets and liabilities and calculate your bottom line. You can’t grow financially – no matter how high your income – unless you take in more that you spend.
So you next step in evaluating our current financial situation is to look at your cash flow to get a notion of where your money is going.
This information is vital to your financial plan. The idea is to see what flows in and what flows out over and entire year and determine how much money is available to achieve your financial goals.
Get a handle on your cash outlays by keeping a journal or diary of your expenditures for a week or – better still – for a month. You’ll see how daily expenses, such as taxi fares, and soft drinks drain your pocket.
The final step in determining your financial resources is nailing down all those ‘other resources’. This task may involve the cooperation of others – your company human resource department, for example, may help you get a handle on you retirement benefits.
Many people have no idea of the value of their ‘hidden assets.’ Social Security is only one example. You must know ho much you will receive. Other wise, planning is impossible.
Adding your net worth is a vital element in creating a solid financial plan. You must know what all your resources are before you can manager them properly. As the saying goes: ‘Even if you know where you are going, a map is of no use if you don’t know where you are standing’.
Figuring your net worth also serves another purpose. It shows you how you’ve allocated your resources. For example, you may have invested most of your resources in various types of bank accounts or personal property – or may have put the bulk of your assets in the stock market.
Unfortunately, many people who after twenty year of graduating from the university can still remember their student’s ID number don’t have the slightest notion of how much they’re worth.
You’ll find a net worth work sheet here so you can add up your assets and liabilities and calculate your bottom line. You can’t grow financially – no matter how high your income – unless you take in more that you spend.
So you next step in evaluating our current financial situation is to look at your cash flow to get a notion of where your money is going.
This information is vital to your financial plan. The idea is to see what flows in and what flows out over and entire year and determine how much money is available to achieve your financial goals.
Get a handle on your cash outlays by keeping a journal or diary of your expenditures for a week or – better still – for a month. You’ll see how daily expenses, such as taxi fares, and soft drinks drain your pocket.
The final step in determining your financial resources is nailing down all those ‘other resources’. This task may involve the cooperation of others – your company human resource department, for example, may help you get a handle on you retirement benefits.
Many people have no idea of the value of their ‘hidden assets.’ Social Security is only one example. You must know ho much you will receive. Other wise, planning is impossible.
I suggest you also read the preceding articles that set the tone for this article:
Building a Firm Foundation
Building a Firm Foundation
Email me with any queries or comments.
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