Goal: Get Finances in Order

A few days ago I wrote that this was the Year of Recovery for me and that I would post about some of my goals with my financial goals being first. I’ve been giving this much thought and getting my finances in order is the goal but unfortunately this is a bit of an ambiguous goal with no clear direction nor anything truly measurable by which to determine success. But rest assured there is a lot more than just a flimsy statement behind this goal.

The overall goal is: Get my finances in Order

The immediate and shorter term goal is assess the state of my finances in detail this month in order to be able to set some measurable and attainable goals. I’ve been reading and writing about finances for years now and I know how to approach most of the tasks for this goal. But I also know that I am not an expert in these matters and for some of these items I’ll be reaching out to professionals (you should too especially if you’re not sure about something).

The Assessment of my financial state breaks down as follows:

  • Determine Net Worth
  • Determine Expenses and Cash Flow
  • Centralize banking with fewer institutions
  • Automate wherever possible
  • State of Investments

Determine Net Worth
In general this is a pretty straightforward activity because you take your assets and subtract your liabilities and the number you’re left with is your net worth. By itself I don’t think that this number has much real value because it only paints a portion of the picture of your financial state. But what it does do is give you a snapshot of where you stand which can be a great benchmark for measurement.

Determine Expenses and Cash Flow
The second and arguably the more important part of the financial puzzle for me is Cashflow and this is determined by knowing how much money you’ve got coming in versus going out. To know this in details you need to know exactly where your money is going. To accomplish this i am going to track all of my spending for the month in a spreadsheet. I know this isn’t the most advanced approach but it works for me because I use Google’s Docs and I can access this online at all times. This lets me enter an expense pretty much right away so I don’t accidentally forget about it. With this information I can determine what changes need to be made and to measure the results. I don’t expect surprises but a detailed breakdown will reveal all.

Centralize Banking with fewer institutions
I’ve placed this on the list because I had my banking and investments in 4 institutions and the reality is that this is pointless and makes keeping an eye on everything a pain in the ass. To start this off I’ve already met with my financial adviser and I have started the process of transferring all of my investments to one institution and one banker that I trust. I am confident in his abilities and his recommendations. My banking has been taken down to two institutions and I’m going to see what’s involved in getting it down to one!

Automate wherever possible
This action really belongs with the centralized banking because as I find where everything is I’m going to ensure that there is no need for me to write checks or manually pay anything. Not automating it means that I can make a mistake way too easily or forget something which I definitely don’t want to happen. By automating payments as well as investment contributions means everything happens at set times and I don’t have to worry about if a payment is has come out or not.

State of Investments
Finally the state of my investments; I don’t have a lot of investments which by itself is not great but the little that I had were not actively being looked at or reassessed. The good news is that I was making contributions but they were small amounts to a few institutions and in the end it really wasn’t adding up to anything substantial. I’ve already centralized this with my financial adviser at one institution and I’m happy with the current setup. I’ll post about this in more detail later this month.

Overall these steps are meant to give me information so that I know exactly where my finances are, what investments I have, what my worth is, and most importantly knowing where my money is going and what its doing. I know that some of it is going to waste and the cashflow assessment will tell me where any how then I’ll be able to make some changes and start putting more of my money to good use rather than to waste. I’ll share more in the coming weeks about this assessment so that if anyone is interested you can see what I’m doing to get the big picture with my money and how I am working towards the overall foal of getting my finances in order

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