Discover the true state of your finances – and which areas need your attention in 2014 – with this easy template from money mentor Nicole Pedersen-McKinnon’s brand-new 12-Step Prosperity Plan.
There probably isn’t one of us who can say we haven’t splurged instead of making an extra repayment on the credit card or chipping away at that mortgage debt. Or worse, spent when we’ve had no money to begin with.
But while paying off debt is one of the cleverest money moves you can make, giving you an instant wealth boost, letting it get away from you is the very worst. And that goes double in a more challenging economic environment.
Debt is really the financial equivalent of quicksand: once it sucks you in, it is incredibly difficult to fight your way out. You will find yourself paying for things long after they are broken or you are sick of them – and at a time you want/need more things.
So Step 1 of my three-step Instant Wealth Check is a debt inventory. Where does your credit card bill stand? What about any personal loans or store finance? And, probably your biggest debt if you have one, your mortgage? Here’s what you should record…
Step 1: How much money you owe to others (your liabilities)
- Credit cards
- Personal loans
- Store finance
- Investment loans
If these figures look pretty large, don’t get despondent – it’s only one side of your financial scorecard. To get a proper idea of your financial position, you need to look at your assets too. These are items that are held in your name, whether you own them outright or have an outstanding loan for them. Step 2 is the quick asset assessment below.
Step 2: What items you hold in your name (your assets)
- Managed funds
- Investment properties
Now for the Step 3 acid test: how your two totals from above compare.
Step 3: Your net result
ASSETS MINUS LIABILITIES
If my Instant Wealth Check yields a negative number for you, alarm bells should be ringing. You probably flash the plastic on a regular basis and may well have borrowed either for an asset that was immediately worth less than what you paid for it… like a car or, worse still, something experiential like a holiday. You need to implement a plan today to arrest your financial slide.
Congratulations if your Instant Wealth Check is positive, but by how much? And is that enough to reach your goals and dreams?
In either case, you need to ditch any debt. Think about it: once you banish your liabilities you are left with unencumbered assets: assets you own in your own right. At that point you can start channelling all the money you now spend servicing debts into building wealth… and enjoy the control, options and freedom that brings.
This is an edited extract of Nicole Pedersen-McKinnon’s just-released 12-Step Prosperity Plan, available exclusively on TheMoneyMentorWay.com. Together with a fully-customisable prosperity tracking tool, it forms a money makeover system that is delivered 100 per cent online and accessible to all.