This is the first step to Financial Freedom

net worthStep 1: Know your Net Worth

List down all your incomes, expenses, assets and liabilities using the personal budgeting spreadsheets. Once you done that, you may be either pleasantly surprised or distinctly shocked to see the computed net worth.

If your net worth is negative, it means that you are technically bankrupty. But if your net worth is positive, that’s good. In either case, there will always be room for improvement.

There is no hard and fast rules on how often you should compute your net worth. But for best practice, we recommend that you compute your net worth once a year.

The destination of this journey you have embarked upon is to achieve financial freedom. To do that, you should maximise your net worth; within reason. Remember, some of the most miserable, miserly hoarders in the world have kept upping their net worth, yet destroyed the very fabric of their lives along the way.

First: Save by cutting down on unnecessary expenses. Tip, if you can use gadgets that are still functioning, why bother to replace them even you can well afford new items.

Second: Time can be your greatest ally. Use it to your advantage. The more time you have, the better for you, to grow your net worth. Tip, the secret to building a fortune is compounding interest. And the only thing that helps interest to compound greatly is time. Without time, compounding simply cannot take place.

Third: Begin investing and then preserve. Keep all your investible funds in fixed deposit accounts or some other low yield guaranteed position is not the wisest thing to do. Over long term, it is vital that you hedge against inflation. The main thing is to begin investing. Then preserve. And finally to coast to an enjoyable period of life when true financial freedom begins.

Remember to read Step 2 : Prepare your Cashflow Statement

Click here for free personal budgeting templates

[ad#ad-3]