| In the last post I explained the basic way to calculate | | | | number is significant, but not as much as its position. |
| your net worth. The reason I wanted to start with | | | | Even if it is positive it may still be short in terms of |
| this, especially with a new launch of this site, is that | | | | the goals and objectives you are trying to reach. |
| all the questions clients have related to investments, | | | | Negative... and there is a lot of work to be done. |
| retirement, college planning, etc. are directly related | | | | Your net worth statement is a valuable tool in helping |
| to the overall objectives of your net worth. Each of | | | | you gather, organize, analyze, and create an |
| the cost centers of your life will collectively, | | | | implementation plan. It is also valuable in evaluating |
| consciously or unconsciously, are represented in your | | | | the probability of achieving the goals you have set |
| net worth. In the discussions to follow, I will be | | | | for your financial life, allowing you an opportunity to |
| relating all of this to your cash flow, which is the | | | | prioritize them and re-structure your next steps. It is |
| engine that drives you down the path to achieving | | | | the beginning of the process and not its end. In fact, |
| your goals. | | | | the planning cycle never ends because many variables |
| Well... What is net worth and why do I care? The | | | | affect it, including your attitudes and desires over |
| answer to that rests in having the ability to manage | | | | time. Understanding what is necessary to achieve a |
| your finances rather than be managed by them. In | | | | financial goal will also make you a smarter investor. |
| compiling the information it becomes obvious that it | | | | Too many people spend a great deal of time pouring |
| accounts for what you own less what you owe. But | | | | over the mountains of information discount |
| what does that mean? Looking at the end number is | | | | brokerages put out hoping to hit the 'big trade' but |
| great if it is large and 'in the black' or positive; it can | | | | have no clue what it is they are trying to accomplish. |
| be quite disheartening if it represents a negative or 'in | | | | One does impact the other greatly because it allows |
| the red' position. Don't despair! It simply is a | | | | you to establish parameters for your investment |
| descriptor of position and does not necessarily mean | | | | behavior. Whether in securities, real estate, or a |
| immediate disaster. It does mean, though, that there | | | | capital investment in your business, you have to |
| is an opportunity to take charge. When managing | | | | know the impact of the move on your overall |
| companies in the past it was important to look at | | | | bottom line now, and how it impacts your future |
| their net worth statement called a Balance Sheet. It | | | | position. |
| gives you a snapshot of the financial position of the | | | | Each person/family has expectations of the future. |
| company that you can compare with other historical | | | | Everything in today's financial services marketing is |
| snapshots to determine if the company is headed | | | | geared to imply that you should make 'gut' moves. |
| down the right path. Different decisions are made | | | | Don't. Be a wise investor and know your limits of |
| using different time comparisons and it allows senior | | | | risk, the rates of return necessary to reach each |
| management to evaluate their goals and action plans. | | | | goal, and when to be where. Hopefully, as we discuss |
| This is the same for you. If you begin to look at | | | | this process, you gain an understanding that the |
| your financials from a corporate-like perspective, you | | | | whole is greater than the sum of its parts. Financial |
| can then bring better focus to allocating your various | | | | instruments have become commoditized in today's |
| resources more efficiently... what are those | | | | world. It is more important to know in which direction |
| resources? Cash, property (home, rental, commercial, | | | | you want to go than to chase the hottest trend. |
| business...), the flow of income, your time (often | | | | Within the structure of the financial evaluation |
| overlooked), your knowledge base, and emotion; | | | | process, we will be able to look at the impact of |
| those last two seem strange in talking money, right? | | | | such things as risk/reward premiums, plan return, |
| Not so. If I was evaluating my corporation's position | | | | backstops, and other issues that play an important |
| and resources, they represent the allocation of | | | | part in the creation of your 'Life Portfolio.' |
| human capital and the morale of the company's | | | | As always, I look forward to hearing from you. If |
| stakeholders which affects many things including | | | | you have any suggestions of information or topics, |
| productivity and sales. But since we're talking Personal | | | | please let me know... |
| finance, what it gives you is an indication of your | | | | 'Til next time... Be Wise... |
| personal efficiency in productivity. The amount of the | | | | |