- Calculate your assets, which include all the things of value you own, such as cash on hand, bank balances, investment accounts, mortgage equity and employee benefits. If you happen to have a car, boat and valuable collectibles, find their market values and include these amounts in calculating the total sum of your assets.
- Figure out your liabilities, which are the debts you owe. Gather your financial records to obtain all the data related to your debts. Make a list with columns for the name of each creditor and the total amount of the debt. Tally these figures to discover your total debt liability.
- Subtract your asset value from debts to determine your current net worth. This can be a positive or negative figure. This is a snapshot of where you are currently in your financial life and the first major step towards the goal of achieving financial freedom. If your net worth is shocking, don't fret because it is never too late to turn this around.
- Determine what financial freedom means to you. Financial freedom requires having monetary resources sufficient to meet your monthly living expenses and unexpected costs, as well as contribute to savings and investments. Take a look at your current income and net worth, and create short-term and long-term goals that lead you to the financial freedom you envision for yourself. An example of a short-term goal is to create a working monthly budget that you can follow. A long-term goal is to pay off a house mortgage in 15 years instead of 30 years.
- Create an action plan that closes the gap between your current income and net worth and your financial goal. Closing this gap will almost certainly require establishing a savings and investment plan. Reduce debt by tightening your budget and reallocating income to reduce high interest credit. Certain valuable assets or collectibles can be sold to reduce debt. Supplemental income sources, or a different career path, may also be necessary to meet your long-term financial goals.
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