I hope you’ve enjoyed this 4 part series, and hopefully it really is an ultimate guide for your budgeting. As always if you missed parts 1, 2, or 3 that’s okay click here to go back to part 1, here to go back to part 2, or here for part 3. I highly recommend that you don’t skip these steps, they’re there to make your life easier and budgeting simpler. So go back, read part 1, part 2, and part 3 then come back here and see what you should do going forward.
Do you know the definition of “persistent?” Google says it’s “continuing firmly or obstinately in a course of action in spite of difficulty or opposition.” That’s how you should be with your budget…Persistent! Like Kevin Hart for example. Do you know how long he was in the industry? 15 years. I’ll repeat…15 years. That’s how long he struggled and worked to perfect his craft and finally he made it big. So, I’m not going to sit here as your cheerleader saying “come on dude/dudete, this stuff is easy. Budgeting is easy man, just do it!” Because that would be a lie…I get it, the first month or so you’re pretty motivated. It’s fairly easy, but eventually one of the 5,000 ads that you see a day (on average) gets to you. You buy an item, and it becomes easier the next time you want to purchase something. The snowball starts rolling. I’m not a minimalist, Kate isn’t a minimalist, we like “things,” trust me, but you NEED to be PERSISTENT with your budget. You’re going to mess up, you’re going to have moments of weakness…that’s okay. As long as you continue to spend less than you make and get back on the bike (no matter how many times you crash and fall), that is what’s important. To help you keep track of how you’re doing along the way, look back every once and a while to see how far you’ve come, enjoy the journey. So going forward, my suggestion is, keep track of your net worth.
What is your Net Worth?
Your net worth in the simplest form is everything you own (assets) minus everything you owe (liabilities). That number (whether positive or negative), is your net worth. Everyone has a different opinion on what should be included as an asset and a liability. I’ll give you my opinion, an opposite opinion, and then let you make the decision on which way you want to track your net worth (the important thing is you do it so you can track how well you’re doing and stay motivated).
My Opinion: Okay, this is just my opinion so take it for what it’s worth (not much, haha). For me an asset is anything that makes me money or has the potential to do so. I track how much I have in my savings account, checking account, Digit account, investment accounts, etc. I don’t own a house but if I did I would include that as well because it has the potential to increase (or decrease) in value. I don’t count my car, clothes, bike, etc. anything that for the most part goes down in value. Liabilities would include any debt that I had, we don’t have any debt but if we did I would include things such as student loans, car loans, credit card debt, mortgage, etc.
Opposite Opinion: I’m sure there is more than just one opposite opinion on this matter but I’ve found this one to be the most popular. This idea says everything you own is in the asset column. The reasoning for this is because you could potentially sell it all and get that money if you absolutely needed it. When I say everything most people simply take my list above and include their cars as an asset. They won’t usually add things such as clothes or a mountain bike because that would be excessive, but you get the picture. The idea on liabilities is the same, anything you owe.
Why track your Net Worth?
My simple answer would be to keep track of your score. I say that but let’s be real…the opponent is yourself! Your net worth tells you what your financial score is for that month or for that year or for the last ten year, whatever, and the only person your competing against is yourself.
Example: Kate and I may be a little late to the party on this, but we just got into the game “Doodle Jump.” The app where you’re a doodle, jumping from brick to brick trying to get as high as you can without falling. The higher you get the higher score you get. I’m more of a veteran so my score is higher then Kate’s (just sayin’), but that’s not the reason I play…I want to beat MY high score!! Let’s be realistic does anyone really care what my Doodle Jump score is? Probably not, do I care? Yes. Same with your net worth, and I know there are people who are insecure about themselves that probably care if they have more money than you, and yes there are people who matter in your life who care as well, but hopefully it’s because they want to help you get ahead (if not then they probably fall in the insecure category). My point is your net worth is for you! To help you stay motivated to keep going forward and winning…against yourself!
Keeping track of your net worth is a great way to stay motivated to keep spending less than you make.
How to track your Net Worth?
It’s really pretty simple.
1. Write down all your assets (whatever you decide that should be included) and how much they are worth.
a. Add them up and write down the total.
2. Write down all of your liabilities (whatever you consider to be a liability, you can modify later) and the worth.
a. Add them up and write down the total.
3. Minus your asset column from your liabilities.
a. The total number (negative or positive) is your net worth, write that number as the final total.
I record mine on a spread sheet, you can see an example below.
You can also use a pen and paper or an app such as “Personal Capital” (I also use Personal Capital and definitely recommend it) to do your tracking.
One of the keys to budgeting is to stay motivated, because well…it’s easy to become unmotivated. Keeping track of how you are doing every month or every couple months to make sure you’re on track is the perfect way to hold yourself accountable. Remember…enjoy the journey!!
Listen…at the end of the day if you choose to create a budget, cut down on your spending, and track your net worth, it’s up to you. I’ve tried to create the simplest, most detailed 4 part budgeting series as possible, to make it easier on you. If you want to stick with it to improve your quality of life again that’s up to you. If you don’t think it’ll actually improve your life then don’t do it. I will say that I’ve seen positive effects from creating and building upon this foundation for my own personal finances (which is of course why I created this series). Is a budget going to make you wealthy? Depends on your definition of wealthy. Will it make your life better? I guess I can’t give a definitive yes, but the answer is most likely. So create a budget, stick with it, be persistent, and yes…begin to better your life!
Part 4 of the 4 part budgeting series, what to do going forward. This is the final part of the 4 part budgeting series. I hope it was simple and intuitive. If you have any criticisms or comments (or praise…) send me an email or comment in the section below. I am including a bonus part you can check out here (when I get it finished) specifically for entrepreneurs on what to do if you have a fluctuating income.