Mastering Your Finances: The Power of Tracking Your Net Worth

If you're serious about improving your financial well-being, tracking your net worth is an essential step. And it's easier than you think! By creating a simple spreadsheet, or using a free template, you can monitor your progress month by month, seeing your wealth grow and identifying areas for improvement. Whether you're just starting out or have been managing your money for years, this powerful tool can help you achieve your financial goals and take control of your financial future. Don't wait - start tracking your net worth today and watch your wealth soar!

In this episode, I will share one of the simplest strategies for budgeting and saving money so you can build a better financial future for yourself. I think this is something that many people overlook, but it is by far the most important aspect of personal finance. It doesn't matter if you're making ten thousand dollars a year or ten million dollars per year, taking a systematic approach for budgeting, saving money, and investing money is crucial. I have friends who are making two or three or four hundred thousand dollars per year, yet they're still broke because they don't know how to manage their finances properly. So, I'm going to share a couple of different strategies that you can use in this video. My goal here is to help you create a better financial future for yourself.

Let's get started. It's important to understand your "why" for creating a budget and wanting to save money. In many cases, people say they want to save money and increase their wealth, but you need to dig deeper than that. Understanding your "why" can help drive you towards reaching your goals and setting new ones. Maybe you have a wedding coming up or want to take a worldwide trip for a year, and you need to save money for it. Or maybe you want to retire earlier than the average American who retires at age 63. Some people retire at a very early age because they budget and stick to it religiously.

Run your Finances Like a Business

Budgeting can be like a "Holy Bible" for some people. So let's dig into this a little bit more. One of the things that I've been doing for a number of years, and I think it's essential, is to understand your reasoning behind creating a budget and saving money. One way of viewing personal finances is to run them like a business. I run myself like a business with my personal finances. Imagine a business trying to profit without tracking their expenses and income. They wouldn't know their profitability, and in many cases, they wouldn't profit at all. This is how 90% of Americans and people worldwide approach their finances. They try to run the numbers in their head, but they end up in a big hole.

To avoid this, it's essential to run yourself like a business. Businesses have different financial sheets that they use to track their numbers.

Create A Personal Income Statement

One of the first things you can do is create a personal income statement. This statement should include all of your income sources and all of your expenses, including fixed and variable expenses. By doing this, you can determine your net income and your cash flow.

Running yourself like a business also means creating a personal balance sheet. This sheet should include all of your assets and liabilities, such as your savings, investments, debts, and mortgages. By doing this, you can determine your net worth and monitor it regularly. Overall, running yourself like a business can help you make better financial decisions and avoid getting into debt. It may take some time and effort to set up these financial sheets, but it's worth it in the long run.

Once you have your total income for the month, you can then subtract all of your expenses. This includes things like rent or mortgage payments, utilities, groceries, transportation costs, entertainment expenses, and any other bills or expenses you have. The goal is to make sure that your expenses do not exceed your income, so that you have a positive cash flow.

By tracking your cash flow on a monthly basis, you can get a better understanding of your spending habits and identify areas where you may be overspending. This can help you make adjustments to your budget so that you can save more money each month.

Track your Net Worth

Another important financial statement to track is your net worth. This is simply the difference between your assets and liabilities. Your assets include things like your savings, investments, and any property that you own. Your liabilities include any debts that you owe, such as credit card debt, student loans, or a mortgage. Tracking your net worth over time can help you see how your financial situation is improving or declining. If your net worth is increasing, it means that you are accumulating more assets and paying down your debts. If your net worth is decreasing, it may be a sign that you need to make some changes to your budget or debt repayment plan.

Overall, tracking your cash flow and net worth can be a valuable tool in managing your personal finances. By treating yourself like a business and keeping track of your income and expenses, you can make more informed financial decisions and work towards building a better financial future for yourself.

Start Budgeting

To start budgeting, the first step is to fill out all of your income. You want to know exactly how much money you'll be making in a particular month, so take the time to do this. Once you've done that, move on to filling out all your expenses. There are a lot of expenses that many people just don't think about, and this is why budgeting is so important. You may realize you're paying for something you don't even remember signing up for, like a subscription to Ancestry.com from four years ago. As you fill out your expenses, view it as if you're in a boat with holes that need plugging. Identify various expenses that you don't need or can get rid of to stop your boat from sinking. Once you've filled out your income and expenses, you'll see your total income and total expenses. This is the most important part. You want to see a positive number, indicating that you have more income than expenses. Many people have a negative number or around zero, which is okay, but you want to get this number as high as possible without sacrificing the quality of your life. Don't go crazy about it but try to eliminate unnecessary expenses.

Create a Personal Balance Sheet

Your liabilities are essentially your debts or things you owe money on. This can include things like credit card balances, mortgage or car loans, student loans, etc. You'll add up all of these amounts and put them in the liabilities section. Once you have both your assets and liabilities filled out, you'll subtract your liabilities from your assets to get your net worth. This number represents how much you would have left over if you were to sell all of your assets and pay off all of your debts. Doing this on a monthly basis allows you to track your progress and see how your net worth is growing over time. It also helps you identify any areas where you might need to make changes or adjustments to your finances. Overall, creating a personal balance sheet can be a fun and rewarding way to track your financial progress and work towards building wealth over time.

But if you're not familiar with spreadsheets or if you just want to save some time, you can get already made spread sheets, https://etsy.me/40HOOej but what you're doing here is you're tracking your net worth on a monthly basis and you can see the progress that you're making. This is a powerful tool for taking control of your finances and achieving your financial goals. It's really motivating to see that line go up and to see your wealth increase over time and it's also really helpful to see where you might be struggling or where you might need to focus your efforts to increase your net worth and ultimately your financial well-being. So I highly encourage everyone to try this out, it's a really powerful tool for taking control of your finances and achieving your financial goals.

If you're not familiar with spreadsheets or want to save time, there are templates available for you to use. Give it a try and take control of your financial future.

Finally, budgeting is an important aspect of personal finance, and there are various ways to go about it. You can create your own spreadsheet or use an already made one, which is free and can save you time. Alternatively, you can use pen and paper, but it will take more time. Tracking your finances and net worth is a great way to stay motivated, and you can create short-term and long-term goals to hold yourself accountable. It's easy to forget about goals, so tracking your progress is essential. By doing so, you can see progress, which can motivate you to save more money or get out of debt.

Overall, budgeting is easy to do, and it can make a significant difference in your financial well-being.

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