Nietzsche said, “People don’t want to hear the truth because they don’t want their illusions destroyed.” Busted! One of the hardest things about my growing financial literacy is that now I have an accurate picture of exactly how much (I mean little) cash flow available I have every week. $40.00 per week for a family of four, to be exact. Ouch! But you know what? It makes it easier to limit our spending when we know our dollars are instead going to things we very much care about (savings account, retirement account, student loans). The very first thing we did when we started getting our financial affairs in order was to sit down and calculate our net worth. This is something we will do every year for the rest of our lives. Again, not because we want to miserly hoard our gold, but because we need to have both the big picture and the detailed picture of where our dollars are going. Calculating our net worth helps us understand that our small daily and monthly efforts regarding our spending are helping us move financially in the right direction. I’m going to discuss monthly budgets in a later post, but I’ll admit we made many unpleasant discoveries about how we were spending our money when we used a fine tooth comb to look at our monthly expenses. If calculating your net worth sounds too difficult or demoralizing, you can do what my friend April did to get a birds-eye approach to your finances. “I just did a projected yearly budget on Google sheets spreadsheet. That was really helpful to figure out yearly income versus yearly expenses and then divided by 12 months to figure out an average monthly target…the FIRE plan is really appealing to me because you can stop being a mindless consumer. Save my way to financial independence instead of earn my way. Takes a lot of pressure off knowing I don’t have to be CEO to get out of the rat race.”
There are many templates online to help you calculate your net worth or to simply establish an understanding of your yearly earnings versus expenses. Here ( nws-blog ) is a snapshot of our net worth statement from a year ago (and it has significantly improved in the interim!) as an example. (Don’t judge! I feel silly sharing this because it exposes some of our poor financial decisions, but I figure the only way to learn and grow as a community is to be transparent). I challenge you to to take an hour sometime this week to sit down and create something similar (and if you’re so inclined, come back and share the results here! I doubt any of you have a NWS with as many zeros behind a negative sign as we do ;).
Overwhelmed by this? Here is a great article regarding a very simple, hands-off strategy to being wise with your dollars–I especially love number 9! (Link from the ever-wise April). As always, would love to hear from you guys about your thoughts concerning the above!
P. S. Mostly unrelated, but here’s a great song for a rainy day.
P.P.S And if you’re a girl and you think this kind of stuff is something you don’t wanna bother with or think about, you need to check out A Story of a Fuck-Off Fund (via the inimitable Joanna Goddard)