I am frequently asked what I think is the most important step toward financial independence. The answer is simple: the most important step is finding out where you stand right now.
An honest “man in the mirror” look at your current financial position serves two important purposes. First, it will most likely scare the hell out of you! Seriously. In this case, I’d suggest that is a good thing. Seeing that your debts may well exceed your assets is a humbling, yet necessary first step toward improving your situation.
The second benefit to this exercise is that it sets a starting point. How will you know if you are making progress without a benchmark for later comparison? Creating a Personal Financial Statement creates a financial snapshot of where you stand today, and we will use that initial evaluation as the basis against which to measure your improvement over time.
So how exactly do you do that? Easy. Ask your bank for a Personal Financial Statement form or just click here for one courtesy of Inc.com. If you are reading this blog, it is quite possible that you may find that the difference between your assets and your liabilities, something we refer to as your “net worth”, may actually be negative. Not to worry! The mission? Simply make a commitment to: A. not make it any worse, and B. check your progress at least once or twice a year.
As I like to say: You can eat that elephant, but only if you take it one bite at a time.