So, how’s it going?…Have you found it all? Gathered it up? Decided to organize it and begin to learn where all of your hard-earned money is going? By giving you some extra time, I am hoping that you’ve had time to gather your stuff and that any stray bills or reminders have come in that help you remember all of the areas in your life that money flies to… The amount can be staggering when we take a cold, hard look at it.
Now, it’s time to be in control, right? Well, congratulations! You are now on the road to controlling your financial well-being! The sky is the limit and your dreams are coming into focus. I’m proud of you!
First, let’s create your financial snapshot. Learning how to do this now will be greatly beneficial as you take a firm grip and control of your money. You’ll learn to quickly pull together the information needed to know exactly where you stand financially at any point in time. Then, the snapshot process should become a monthly phenomenon. Make a date with yourself to sit down for 15-20 minutes and reconcile your net worth monthly. (Wow, how liberating does THAT sound?!?)
To create your $mart Girl$ Picture Perfect Snapshot™, you will need to pull out the documents that you’ve been gathering over the month. Whatever organization system you chose, file folders, a three-ring binder, etc., pull it out and set it on your desk or dining room table or the family room couch – wherever you are comfortable and can spread out and think.
Pull out a blank sheet of paper, or create a new spreadsheet on your laptop, and create the following categories, going in a line, down the left side of your sheet (leave plenty of room for sub-categories): Income, House/Home, Insurance, Investments, Debt, Expenses.
Keep in mind, we are not creating a spending plan at this point, only a snapshot of your financial status. An exhaustive list of all the categories in which you spend your dollars will not be represented in this exercise.
Also, all amounts are considered monthly. If there are areas that you do not pay monthly or have a monthly bill for, average the amount to come up with a monthly total. For example, most car insurance bills are given in six-month premiums. If your car insurance is $300 every six months, list $50 as your monthly total.
Under Income, make the following subcategories as they relate to you: Mine, Spouse/Partner, Alimony, Child Support, Less Taxes, Other.
House/Home: Mortgage/Rent (technically, if you have a mortgage, this is also a debt, but for now, we are going to leave this amount here), Utilities (average), Insurance, Taxes.
Insurance: Medical, Car/Auto/Motorcycle/Boat, etc., Life, Disability, Long-term Care.
Debt: Car, Credit Cards, Loans, Equity Lines, etc.
Ok, is this really so bad? At this point, we’ve just got a whole lot of numbers listed. We’re now going to sort them into a format that is understandable. It must tell your story. Here we go…
Once Upon a Time, there was a lady who looked just like you. She was lost and out of control with her finances. Then one day, she chose to take control of her money and become a $mart Girl. Even though her financial situation wasn’t beautiful, she was. Control and confidence made her the most beautiful woman in the land. She found solace and assurance in her new found $martness.
Create a TOTAL line for each category. If you’re using a spreadsheet program to organize your financial data, create a formula at the bottom that subtracts the totals from the House/Home category, insurance, and debt. Add the investments and income categories. How does your final total look?
If it’s positive, GREAT! Know, however, that you are in the minority and it takes hard work to stay here… We’ll work on ways to ensure that you move farther and farther into the black. We don’t DO red here.
If it’s negative, do NOT despair! This shouldn’t be a huge surprise if you’ve got lots of debt on credit cards and loans. It’s almost impossible to borrow other people’s money and stay in the positive. We’ll work on ways to MOVE onto the positive side of the balance sheet and GROW your wealth!
We will work on realizing and reducing these expenses next.
For now, rejoice in the major step that you’ve accomplished: you’ve just calculated your net worth! You know, right now, at this very moment, how much you owe and how much you’ve saved toward your future. You also know whether or not you like these numbers.
Next steps:
- Start creating goals. Now that you’ve identified your financial blueprint and how to identify areas for improvement, it’s time to make some goals to work on. Make your goals SMART ones, though.
Specific – avoid generalities and make the goal as specific as possible.
Measurable – establish specific criteria that you can measure as you move toward your goal.
Attainable – make the goal real to you and something that you believe that you can do.
Realistic – make the goal something that is actually achievable.
Timely – set a time line to achieve your goal.
- For one month, keep a small notepad with you and write down every single penny you spend, from the tank of gas, to the bottle of water, to the quarter you give your son for the vending machine. To make changes in our spending patterns, we must first know what we spend money on. While that may sound silly, we seldom know where all of our money has gone at the end of the month. Well, here’s the chance to find out. Write it down. Nothing is wrong or right, just keep track of it.
***As a bonus to this exercise, if you feel so inclined and really want an eye-opener at the end of the month, write down your mood/feelings each time you spend something. We may uncover an emotional side of your personality that we can tame and therefore stop feeding with our hard-earned money…
Invite your friends and colleagues to become $mart, too. Please share this information with others around you. We can all use some money $mart$, right?!
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