Wednesday, April 22, 2015

6 Steps up the Financial Ladder: Step 1

Do you ever wonder how you'll ever get ahead financially?  Do you ever wonder why some people seem to be 'blessed' or lucky?  Has it ever bothered you that you just don't seem to 'have what it takes' to get ahead financially?  Are you always trying to find the 'big change' that will transform your finances? 

Stop wondering, I plan to take you through the 6 steps up the financial ladder.

Many people will be able to quickly complete 4, 5, or even all 6, but many people may struggle with Steps 2 and 3. It is important to be diligent and complete the steps in order and not take short cuts. It is also important to remember that you may never reach step 5 or 6 but it is worth trying.

Step 1 is the obtain the vital facts about your finances.

Make a list of all the things you own: Home, Car, Accounts, Investments, Pensions, Collectibles
Make a list of what you owe: mortgage, credit card, loans, line of credit, personal obligations
Make a list of your annual income: paycheques, government benefits, dividends, interest, royalties
Make a list of your annual expenses: home, car, fuel, food, debts, insurance, interest, fees,

You should review monthly or quarterly for cash flow, perhaps quarterly or annually for net worth

Be as accurate as possible within reason. Be accurate enough to enable you to make good choices.

Have you ever asked the question: “Where does all the money go?”  

You should be able to answer that question quickly and accurately.

To track your cash flow you need to itemize and categorize all expenses. I included taxes and payroll deductions but you don’t have to.

I use an automated tracking program available for free through my bank. It categorizes my spending automatically and only needs minor maintenance. I review this monthly. It takes about 30 minutes of my time on a monthly basis.

You can use or just use your bank account and credit card statements with MS Excel or similar.

It is difficult to make decisions about spending without these basic facts so I recommend putting a system in place that is easy to use and presents the information in a useable format.

Making note of your assets and liabilities will likely take less than 10 minutes.

Should be updated annually or after any major changes. 

Good luck completing Step 1.  Next is Step 2.

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