How do you check your financial health? Today we’ll continue our series on “the basics” and discuss what you need to do to get an overview of your “financial fitness”.

Why Should I Take a Financial Inventory?

Let’s face it: motivation is key. If you are vague about your starting point (e.g., “I know I’m in debt, but God knows how much!”), it is highly unlikely you’ll swiftly reach any financial goal — even a small one.

Think about your top three financial goals. Can you name them right now? If not, chances are good you’re not maximizing your resources. As a result you might never reach your financial goals.

Here’s a personal example. My top three financial goals were: paying off my college loans, saving for retirement, and purchasing my first home. Once I was able to passionately get behind all three “end game” goals I could find the discipline to save and invest accordingly. I’m happy to report that I’ve purchased my first home and am now re-adjusting my “top three” goals. That’s the power of taking and monitoring a financial inventory.

How Do I Figure Out My Financial Inventory?

First, you must answer these three questions.
1 - How much do I earn?
2 - How much do I spend?
3 - What do I own, versus what do I owe?

Next, you’ll use two tools - they are power tools that don’t require protective gear.
1 - A cash flow statement
2 - A net worth statement
Don’t be scared!

Figuring out your Cash Flow. This compares the money you earn to the money you spend. The simplest way to do this is to make a list of every regular monthly expense you have. Yes, I know some expenses vary. Focus on the firm expenses first and then use a budget to determine your flexibility in areas that fluctuate.

Use Geezeo’s Budget tools to get an accurate look at your cash flow. Geezeo’s Spending Targets will change from green to yellow to red to let you know when you’re approaching trouble. On paper spend down your entire inflow of cash so you can direct your cash toward your top three goals.

Figuring out your Net Worth. You can do this the old-fashioned way by making a list with two columns. On one side list all of your assets. On the other list all your debts owed. Tally both columns and determine if your net worth is positive or negative. Or you can do this the hands-off way: you can see and track your net worth over time in your Geezeo Dashboard.

The point is: track your net worth because it keeps your “eye on the prize”. It’s motivation. Tomorrow we’ll discuss how to know what you want to achieve with your money. Good luck!

Related
* Stock Cash Flow 101
* Why the Statement of Cash Flow Matters
* Investing: Getting Started with Discounted Cash Flows