How To Take A Fearless Financial Inventory (The Easy Way)
Taking a financial inventory (i.e. compiling a list of bills, expenses, debts, assets, liabilities, etc.) is an exercise that can strike fear deep into the psyche of even the more financially organized among us. So, this article is meant to help you break the process down into small, bite-sized, no overwhelm pieces that will help you to accurately assess your financial situation and help you to know what to do next.
Let's start with 3 simple questions:
1. Do you know how much money you have?
2. Do you know how much money you earn?
3. Perhaps most importantly, do you know how much money you owe?
If the answer is not a resounding “yes” to all three, then it’s definitely time to do a financial inventory. Now, I know the thought of “getting it all together” can be completely overwhelming, so let’s make sure we address that up front.
Eliminate The Overwhelm Before It Starts
Getting into this process of tracking down everything you owe, might take a time and it might take several sessions.
That's why I use the “25 minute time block strategy” with new students when I’m teaching them budgeting and just generally helping them to get their finances organized and streamlined.
It pretty much eliminates the feeling of overwhelm at the scale of this often mammoth task of just getting started.
Here’s how it works:
2. If you have access to a timer that has multiple-timers within it, (like the “tomato timer” above) set the first timer for 25 minutes.
3. Set the second timer for either 5 or 10 minutes. This will be the duration of rest between 25 minute “time block” intervals.
4. Start the 25 minute timer at the time you begin each task.
5. Take a breather with the 5-10 minute timer in between tasks to help you minimize anxiety and reduce that feeling of being overwhelmed.
I actually use this exact strategy literally every day for my own finances and for when I’m creating blog content and I promise you, it works!
It has dramatically improved my productivity as well as reduced my sense of overwhelm in so many areas of my business and life.
This little productivity hack could be a game changer for both your finances as well as other areas of your life!
Try it and let me know how it’s working for you.
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Next, Write Down Everything You Owe
The next thing you’ll need to do is write down everything you owe.
I have a great, simple and free resource in my library called the “Everything I Owe” worksheet. This will help you keep things tidy and organized.
This list is going to include:
Irregular expenses (like bi-annual car insurance, HOA fees, car tag renewals, etc.)
Debts (including mortgage, second mortgage, cars, credit cards, personal loans, student loans, etc.)
And again, if you're looking for a tool to help you begin the process of organizing your finances, check out my FREE Debt Elimination Quick Start Guide.
Net Worth Worksheet
This is simply everything you own minus everything you owe. That’s the simple definition of your net worth.
Again, I have a great free worksheet in my library called the “Net Worth” worksheet.
If you’ve added it all up and it’s negative, don’t panic.
I can help you get it to “zero” and then start moving to the positive with my free “8 Steps To Erase Debt” guide.