A journey of a thousand miles starts with the first step. It’s hard, sometimes paralyzing to start something new. And when it comes to a subject like personal finance, not only is it difficult to begin but there is an overload of information on the topic which makes it all the more confusing on what you should do first!
Just like when planning a trip, first you need to know where you are currently. You have to take inventory of the things you have. For a trip, this would be items like clothing, equipment, and food. In the world of personal finance this translates into your financial position today. Start by compiling a list of your assets and debts. The good, the bad, and the downright ugly!
Luckily it’s the computer age. The days of making personal finance spreadsheets are over! I used to enter in each income and expense item, line by line.
Now there are apps and programs to keep track of all this information. In a matter of minutes you can connect all your accounts. It’s that easy!
I started with a program called Microsoft Money back in the early 2000s. Now I use Personal Capital. It’s simple, straight forward, and easy to use. I love it!
As of the end of 2019 there are over 2.4 million users that have connected over $12.3 Billion to the platform. Personal Capital uses the latest technology. Including strong encryption to protect your personal data. And the best part about it, it’s FREE! You may even qualify to receive a $20 bonus by signing up with this link.
Go ahead and set up your FREE account now and start connecting your financial life. I will wait for you.
Now, with all your accounts connected, you have an inventory of your finances. Congratulations, many people didn’t make it this far. YOU did, and it only took about 10 minutes. Great Job, keep going!
Upon viewing your Personal Capital account, you are hit with a wealth of information (pun intended!). The Overview screen gives you a financial snapshot of where you are today.
Don’t worry if you aren’t happy with the numbers on your screen. I am here to help, you are here to learn. We will travel down this road together, your knowledge will grow, and so will your savings!
The first section to review is your Net Worth. Locate this tab under the Overview heading. It is calculated by taking your assets and subtracting out your total liabilities. Your net worth is your financial report card and is an indicator of your financial health. A positive number indicates you have more assets than debts.
For many people the resulting number is negative. This means there are more debts than assets.
You may be experiencing some unsettled feelings, you are not alone. Most people I work with start out exactly where you are. Remember, this is the beginning of your personal finance journey. You can start making changes today, and begin working towards your dreams.
Below the Net Worth section, all the accounts linked to the platform are listed. Click the triangles next to each section header. It expands and contracts the details of each.
The Cash Flow tab is located under the Banking section. It is calculated by taking your income and subtracting out your expenses. A positive number indicates you are saving money each month. However, a negative one reveals you are spending more than you make.
Personal Capital also makes it easy to review your income or expenses only. Do it by clicking on the corresponding header. Violà!
The diagram at the top is my favorite part of this section. The first line on the graph is solid and represents your cash flow for the current month. The dashed line shows it for the previous month, which allows you to compare the months to one another.
The information revealed from the line graph may prompt some questions. Some to consider are:
Below the diagram, all your transactions for the period are displayed. Be sure to look through the expenses and make sure all purchases were authorized. If not, call your credit card provider. The number is on the back of your card.
This exercise has probably stirred up some of your emotions. You may be experiencing a sense of lack, doubt, or even guilt. This is completely normal.
Remember, starting something new is difficult. However, you have just completed the first step on your personal finance journey. You have already gone further than some will. Celebrate your first win!
But, don’t forget to proceed to the next step, Goal Setting.
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