Financial Success in 2016 – part 2

Following on from the first article in this series looking at getting started by identifying your goals, you should now have a list of the goals you want to achieve.

Step Two – Know what your current financial position is

Sit down and take an honest look at your entire financial situation. You can never take a journey without knowing where you’re starting from, and a journey to financial security is no different. You’ll need to figure out on paper your current situation. Having it in your head is not good enough. What do you own and what do you owe. You will be creating a net worth statement.

Your net worth is the difference between all the things of value that you own, and all the debts you owe. In financial terms, your net worth is your assets minus your liabilities. Effectively if you sold everything today how much money would you have in your hand? Calculating your net worth is fairly simple to do.  

You put all of your assets in one column and list their value and all the liabilities in the other column and list their value. Note that you don’t want to include things like clothing and furniture as they really don’t have much value. Also many people include their life insurance policy. Don’t include this unless it has an investment component as it’s only useful when you are no longer here and it’s of value to your beneficiaries not you.   Be conservative. It’s best to underestimate rather than overestimate.

 

Assets	$	Liabilities	$
Cash House Holiday home Car Investments KiwiSaver Shares Investment Properties Antiques & valuables Superannuation		Consumer debt Credit card debt Student loans Mortgages Loans to family members Car loans
	Total $		Total $
Total Assets minus Total Liabilities = your Net Worth

 

You could also use the calculator on the sorted website: https://www.sorted.org.nz/calculators/net-worth

Now you have worked out what you current financial position is you know your starting point. Every year you want to be in a better financial positon that you were at the beginning of that year. It doesn’t matter if your starting point is behind $0 or you already have a good pot of money. The important thing is moving forward by as much as you can.

Lisa Dudson is a bestselling author and Registered Financial Advisor with over 15 years industry experience. Lisa offers financial advice through www.acumen.co.nz and co-owns the New Zealand's leading property investment agencies www.ifindproperty.co.nz & www.propertyladder.co.nz

READ MORE: Financial Success in 2016 – part 1