Net Worth AnalysisAll your assets and liabilities should now have been entered into the Net Worth Worksheet and at the bottom of each column, there will be totals. Hopefully, your total assets are greater than the total liabilities. If not, we will create a plan to turn it around!
At the top of the worksheet, you will also find a debt ratio calculation. This provides a percentage of your assets to your liabilities. Generally, the lower the debt ratio is the healthier you are financially.
Part of reaching financial freedom is to focus on a consistent increase in your assets and a consistent decrease in your liabilities which will result in a lower debt ratio and an increase in your net worth. To track that you will want to periodically complete the Net Worth Worksheet to gauge your progress. We recommend completing it on a quarterly basis when you are just starting out.
How can you increase your net worth? By making a plan. We call it a spending plan. The next step is to create a spending plan by breaking down your income and expenses. As well as what you want in your future.
As part of the analysis of your net worth, start to consider what you would like the worksheet to look like next year. Then dream further out to five years. What will it look like then? What will it look like in 10 years? Once you have your future plan, we can incorporate that into our spending plan. So start dreaming!