You Are Here
Do you love traveling?
If you’re like me who loves traveling and exploring new and exciting places, then once in a while we find ourselves looking for a certain restaurant, finding a souvenir shop or navigating through an unfamiliar tourist spot.
Of course it’s a big relief when we see a huge map that shows us that “YOU ARE HERE“.
It clearly tells us where we are right now and where exactly we need to go.
Is this significant in taking charge of your personal finances?
I’ll show you how you can create your personal finance starting point similar to the “YOU ARE HERE” concept when we travel.
Where are you today?
In order for you to reach your financial goal (We’ll talk about your personal finance goals later), you need to know where you are right now financially.
So if you are serious enough to take control of your finances today, you’ve come to the right place.
First, we have to know what are the three (3) important parts that determine your current financial situation.
Note that each of these three are lessons in itself so just click the links in order to proceed to the lessons. What are those?
- Net Worth Statement – To put it simply, your Net Worth Statement is an overall picture of what you own (Your assets) and what you owe (Your liabilities). If you want to get technical, here is the definition of Net Worth from Investopedia
The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure of how much an entity is worth. A consistent increase in net worth indicates good financial health; conversely, net worth may be depleted by annual operating losses or a substantial decrease in asset values relative to liabilities. In the business context, net worth is also known as book value or shareholders’ equity.
- Cash Flow Statement – This statement tells us exactly how much money you earn (income) and how much you spend (expenses). Again from Investopedia
A revenue or expense stream that changes a cash account over a given period. Cash inflows usually arise from one of three activities – financing, operations or investing – although this also occurs as a result of donations or gifts in the case of personal finance. Cash outflows result from expenses or investments. This holds true for both business and personal finance.
- Safety Funds – Also known as Emergency Funds but I’d rather call it Safety funds because it’s a more positive phrase and it gives you peace of mind. Even investopedia calls it emergency fund
An account that is used to set aside funds to be used in an emergency, such as the loss of a job, an illness or a major expense. The purpose of the fund is to improve financial security by creating a safety net of funds that can be used to meet emergency expenses as well as reduce the need to use high interest debt, such as credit cards, as a last resort.
These three things make up our whole personal financial “YOU ARE HERE” point.
If you’re serious enough in taking charge of your personal finances, you should be starting right away in organizing your Net Worth Statement, Cash Flow Statement and Safety Funds.
By the way, the website Investopedia is very useful when you encounter scary financial terms.
Familiarize yourself with their website and soon you’ll be able to catch up with all the financial jargons you might encounter.
Stop reading this! Go ahead and start conquering personal finance!
To our success in all areas of life,
Argel Tiburcio, CIS, RFP Graduate Member
I’m on Facebook: http://fb.com/ArgelTiburcio
Image source: http://gbsjp.org/wp-content/uploads/2013/01/money-savings.jpg , http://www.thenancyway.com/sites/338/uploaded/images/20120105Finances.jpg
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