Managing Your Money Series: Rule #1 – Take a Financial Snapshot

I struggled with how to title this post.

Originally, I wanted to call it “Rule #1: Turn on the Lights.” We tend to keep our problems in the dark, because we’re too afraid to expose them and confront them. Yet Jesus said, “The truth will set you free.”

In every area of our lives, not just financially, there is incredible power to being fully open and honest. Indeed it is the path to freedom.

The journey of a thousand miles begins with a single step right? Well…kind-of. It begins first with understanding exactly where you are so that when you take that first step it’s in the right direction. That’s what Rule #1 is all about…turning the lights on to your financial situation and getting a clear picture, maybe for the first time, of exactly where you are financially. Let’s get started.

What You’ll Need

1. Time: This will probably take two hours, so grab some coffee and settle in.

2. Spreadsheet or Notebook: Going through this process for the first time will require gathering a lot of information. We recommend creating a spreadsheet where you can keep all of this information in one place. Keep a record of the following information: your financial websites (ie, banks, loans, bills, etc), account numbers, log-in information, due dates, interest rates, etc.

3. All Pertinent Financial Records. This is where you should go online and access all of your accounts, including checking, savings, investments, credit cards, school loans, mortgages, and any other assets or debts. As you do this, bookmark the sites, and record them on the spreadsheet listed above so that you’re only doing this task once.

4. Courage: You may not like what you’re going to see, but don’t be discouraged. Just work the plan and let the plan work. If you get overwhelmed, remember that it’s only numbers.

5 Steps to Getting a Clear Financial Picture

Step 1: Make a List of all Debts.

If you owe money to someone else, whether it is “good debt” or not, write it down. Include the amount of the debt, the interest rate, the minimum payment, and the date each month that the payment is due.

Step 2: Create a List of all Assets.

Make a list showing the value of everything you own, including the following: Liquid Assets (cash, bank accounts, money owed to you, bonds, etc), Investments (mutual funds, stocks, real estate, business interests, etc), Long Term Assets (retirement savings, pension plans, etc), and Personal Assets (personal residence, vehicles, household furnishings, collectibles, etc).

Step 3: Determine your Net Worth.

Your net worth is simply the amount leftover once you total up your assets and subtract all of your liabilities. Financially speaking, net worth is the true measure of wealth. CNN has a very simple tool to calculate your net worth. Once you have completed the exercise, I recommend reading this book excerpt by T. Harv Eker.

If you have a lot of debt and little savings, your net worth may actually be negative. That’s ok, the fact that you are now paying attention to your finances means that you will quickly see a change in this. So just work the plan and let the plan work.

Step 4: Determine your Monthly Income.

What is the combined total of all income each month, including salary, wages, bonuses, tips, etc?

Step 5: Determine Your Monthly Expenses.

If you’re not tracking your expenses, then you will probably be shocked at where your money is going each month. I recommend going to your bank’s website and downloading all transactions for the last three months into Excel. You can easily create a column where you can write in next to each transaction what it was for, such as gas, entertainment, groceries, restaurants, etc.

You can sort the spreadsheet and total up each category to get a clear picture of your average monthly expenses. If you’re not familiar with Excel, there are excellent examples of how to use it at YouTube, such as this one which explains how to sort data. Or, just keep it simple and do it manually.

Step 6: Create a personal profit and loss statement.

This is common in the business world, but we fail to adapt it to our personal finances. Basically, a P&L statement for your personal finances would look like this: “My total monthly income of $___  less my total monthly expenses of  $___  =  $___.

The final number is the amount leftover after all of your expenses have been paid. This is a key number as you want to do everything possible to get this number higher every month, either by increasing your income, decreasing your expenses, or both. What you do with this money will greatly determine whether or not you ever become wealthy.

How are you doing so far? If you’ve completed all 6 steps above I’m very proud of you! So many people want wealth, but they’d rather go buy a lottery ticket than actually do the work to create true wealth. You’re putting in the time and labor needed to learn how to manage your money, and trust me, the rewards of your labor will be well worth it! Stay tuned as our next post is Step 2: Create a Spending Plan!

I’m going to be creating a spreadsheet soon to help walk people through the 6 steps. If you would like a copy of this, please send us an email.

Committed to your success,


Comments? Did you get stuck on any of the steps? What was your favorite part?

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