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“Even if you’re on the right track, you’ll get run over if you just sit there.”

– Will Rogers

AS A FIRM focused on financial planning and investment management, one of the most common questions asked from current and prospective clients is the same one. How am I doing? People tend to doubt their ability to judge how they are progressing towards their financial goals. They want to know
how everyone else is doing relative to their results. Then after a pullback in the markets, these concerns are even greater, as their financial statements reflect the impact.

If this is you, then we wanted to provide a starting point for your own independent analysis. The first step we would recommend is with your Net Worth Statement.

If you have never done this before, it is ok. Today is a great day to get started, you can email our office for a form or grab a blank piece of paper. As you start to list your assets, do not be concerned the first pass about classifying them, just start making a list. Once you think you have every asset listed, then you can start to put them in the following categories. Cash or Cash Equivalents, Investments, Property, and Other. For your liabilities, simply add up anything you owe. Take all your assets and subtract your liabilities, this difference is your current Net Worth. It is not complex.

What we would recommend is to then look at a few questions to learn more about what the document shows about the health of your current financial situation.

  • If there was an emergency today, how well could I handle it? When you think about how much you can “go-to” for emergencies, simply look at the current amount of all your Cash or Cash Equivalents. Do you have at least 3-6 months?
  • How much of my assets are in productive assets? Productive assets are only an asset that has the potential to generate income for you over the next year. Your primary residence has likely increased in value but unless you want to move out and start using it for a rental property, it should be excluded.
  • How likely am I to borrow? If you take the total of all your liabilities and then divide by your total assets, this will tell you a lot about how much leverage you currently have in your total net worth. Knowing this ratio is a key indicator of your financial position.
  • How much do I normally accumulate each year? Take your current total Net Worth and divide by the number of years you have worked professionally. This will tell you the normal amount you accumulate each year. Creating a Net Worth statement and reviewing the results of these four questions can give you a much better picture.

If we can be a resource to help you see if you are on track, please contact us at www.boxfinancial.com.


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