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The first step to financial freedom?
Knowing where you stand.
Before you even think about where you want to go, you first need to know where you really are. So it’s time to sit down and figure out exactly how much you’re worth. It’s not hard, but it will involve a little thought. Not to mention a little organization—and that’s where Red Portfolio comes in.
Net worth is calculated by adding up your assets—all of them—and then subtracting your liabilities. So first think about your assets—everything you can call your own. Consider all of your savings and retirement accounts, and your home if you own one. But if you dig a little deeper you might also find personal items like art, jewelry and collectibles that can be included in your list of assets.
Now on to liabilities—this is the not-so-pleasant part of the equation. This is a list of everything you owe, like balances due on loans or mortgages, and especially all those credit card bills. Be honest with yourself and cast a critical eye on your liabilities. It’s the only way to get an accurate indication of your net worth.
Once you have the lists, you just have to do the math. For example:
| Assets |
| Home (value) |
$150,000.00 |
| Savings |
30,000.00 |
| Retirement |
50,000.00 |
| Total Assets |
230,000.00 |
| Liabilities |
| Home (owed) |
$100,000.00 |
| Credit Cards |
20,000.00 |
| Tuition (per year) |
5,000.00 |
| Total Liabilities |
$125,000.00 |
If you’ve never done this exercise before, it’s a real eye-opener. You may be pleasantly surprised to see how much you have. Or, you may discover it’s time to get serious about preparing for your future. Either way, you’re ahead of the game because you’re one step closer to your dream of financial freedom.
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