Posted: 19 Apr 2008 05:33 AM CDT
Flickr photo by Rick Harris.
Calculate your net worth this weekend
Your net worth is a critical piece of information to track on your journey towards financial freedom. To know how far you have travelled on this journey, you need to know how you have fared in the key indicator that charts your performance towards financial freedom. Net worth is not the only thing important in financial freedom as by itself being financially free as a end does not satisfy. What satisfies is how your time and life is freed to pursue other areas that give you better satisfaction whilst not having to worry about finances and earning a living.
CNN money has an interesting net worth calculator based on USD and US market. Of course, it is not strictly comparable to Singapore but you can use it as a gauge on how you are doing vis-a-vis many US residents. Input your age and annual income (in USD) and see how you fare against others in similar age bracket and income bracket. Are you above the median or below it?
Know your net worth so that you can improve it
Knowing your net worth is not an exercise in numbers, but rather it is one of the means by which you measure your own performance to a benchmark. That benchmark is how close or far you are to your targeted nest-egg for financial freedom or financial independence.
Unless you are aware if you are moving closer or further away from your target, you won’t be able to take effective corrective measures to steer yourself towards your ultimate objective.
I deliberately put in photographs from flickr of places that are beautiful and real. These are places that I would visit one by one as I become more financially free. I recognise that one of the benefits of moving closer to financial freedom is that I will become less trapped in the time-money trade-off that binds us all to our careers, jobs and businesses.
I have recently put in a simple chart in my Excel worksheet that is used to track my own personal net worth as well as my investment performance for the last 5 years. It is a bar chart that shows the first bar as my target in financial freedom, and the other part tracks my actual net-worth (excluding my home). So far, I have reached 40% of this target and have 60% to go and still many years ahead of me to work at it.
The chart helps me focus on what is important to me, that is to actively pursue living within your means, saving and investing, growing my means and protecting my means. It is kept deliberately at the front of my Excel worksheet to emphasise the destination I am moving along towards financial freedom.
Even as you are sipping your cup of coffee or tea and reading the Saturday newspapers. Why not try the net worth calculator and get yourself thinking about if you are on track or not. It’s not so much knowing if you are ahead or behind the curve but rather what next actions you will take to move yourself forward in the curve.
Be well and prosper.