August 2, 2013

Tracking your financial success by the size of your paycheck is a mistake. Why? How should a person track their wealth?

2 thoughts on “August 2, 2013”

  1. Katherine Graham says:

    People who track their financial success by the size of their paycheck live moment by moment. They have a decent job and have increased their bills to equal their monthly income. They are living paycheck to paycheck. Instead, people should track their wealth by tracking their monthly expenses, using one method to purchase their “stuff”, print their statement off once a month and break their spending down based on categories (bills, groceries, etc.), review their spending carefully (they should ask themselves, “Where is my money going? Where can I tighten up? Am I spending more than I am making?), become more aware of their spending based on their previous month’s accounting, and design a plan that fits them and stay with it. Mike Finley has created a very helpful spreadsheet that anybody can use to track their monthly expenses…all a person would have to do is plug in their information!

  2. Mike Finley says:

    Nicely put, Katherine. Let me add just a bit more. Once a person consistently tracks their spending, they start to get an idea where their money is going. This is when the budget starts to form in one’s mind. The budget is followed because a person has a written down financial plan with their short and long term goals. They make it a priority in their life to reach those goals.

    Tracking one’s wealth should not be done based on the size of the paycheck, but the accounting of their assets minus their liabilities. This is done by completing the net worth statement. The net worth statement is how a person tracks their wealth. Gradually over time, one should reduce their liabilities (debt on depreciating assets) and increase their assets (ownership in appreciating assets). There is a path to wealth. Identify the path, Get on the path, Stay on the path. Finally, show others how it can be done. YOU are the answer!

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