The first step in getting your finances in order is to develop a net worth statement. In a net worth statement, you list your assets on one side and your liabilities on the other side. Think about it as own and owe. Your net worth gives you a sense of your financial health.
To fill out these forms, you’ll need the most recent statements for all of your deposit accounts — checking and savings, 401k, IRA, Roth IRA, mutual funds, college funds, bonds, etc. You’ll also need to know what debts you have. You aren’t looking for monthly payments, but for total amount owed.
Once you’ve listed your assets and debts, you add each list and then look at the total for each. You want your net worth to be a positive number. If that number is negative, you need to take a serious look at ways to reduce debt. Above all else, stop adding to debt unless you are in an emergency situation. In Wednesday’s post, we’ll look at how to find money in your budget to throw at the debt. If the number is positive, yay! On Friday, we’ll talk about the types of savings that you might want to have.