Okay, so far on our journey to financial health, wealth, and happiness we have made the decision to take control of our financial lives, we have picked our annual financial day, chosen to make financial education a part of our habits, and brought the whole family into the game. Now we need to figure out where exactly we stand in terms of our financial snap shot.
The first step is to figure out what our debt situation is. This includes everything we owe, every debt instrument we use, and what are the terms on our debts. If we have a mortgage and / or a secured line of credit on our home how much is owing? What are the details in regards to interest rate, maturity, amortization, property taxes, and creditor insurance? How much of our payment is going to principle and how much to interest? What is the realistic value of our home?
The next step is to look at our credit cards. How many cards do we have? How many do we actually use? Whose name are the cards in? What are the limits on the cards and how much do we owe? What is the interest rate on each card? Do we get any perks like cash back, travel points, AirMiles, or Aeroplan? Do our cards have annual fees? Are we paying for any creditor insurance?
What other debt do we have? Personal loans, student loans, vehicle loans or leases, private debt? How much do we owe? What are the terms on each debt? What are the payments? What interest is being paid? Is there any creditor insurance on the debts? What is the amortization for each debt?
Now that we have an accurate picture of our liabilities, now we need to look at the positive stuff, our assets. Do we have a pension plan, group RRSP, or personally held RRSP? What are they currently worth and how much are we putting into them on what frequency? Do we hold any other investments in a TFSA or non-registered account? What are they worth and how are we contributing to them?
Do we own any insurance with a cash value? If we do what is the value and are there surrender charges? Are we covered for life, disability, critical illness, or long term care issues? Who are we insured with, how much coverage do we have, what are the terms, and what are the payments?
Do we have any properties including our own home, vacation property, and any rental properties? What is the realistic value of them? If we have rental properties are they positive cashflowing?
Have we been putting money aside for our children’s education? If we have where is it, how much is it currently worth, what and when are we contributing, and are we collecting all available grant money?
Do we have any collectibles or other valuables? What are they, where are they, and what are they worth? Are they properly stored and properly insured?
Once we have gathered and compiled our information we can take an honest look at the facts and start to map out the best route to get us to where we want to be financially.
“To create a plan to get to where you want to be you first have to figure out where you are starting from.”