Get Your House In Order
Where to start?
Start by acknowledging what you currently have;
- your liabilities (amounts that you owe other people), and
- your assets (what you own).
Knowing what you have and what you owe at any point is fundamental to your financial health. Are you about to go bankrupt, are you optimising your savings, do you have enough money for "future you"?
Take a blank piece of paper, or excel spreadsheet (my favourite) and write down everything that you own or owe.
Item you own (assets) include:
- Bank account with cash in it
- Stocks and shares account
- Jewellery, antiques
Items you owe (liabilities) include:
- Credit cards (with the corresponding debt on them),
- Overdraft Facility
This register is a fantastic way to understand everything in your possession.
This might take a while; for instance, old pension schemes from previous employers might require an email to the HR team of your previous company. DO IT. This is money you have earnt it; you are owed it.
Think how good you'll feel afterwards once you've collected all this information!
Beside each of the financial assets (what you own), and liabilities (what you owe), note down;
- who it is with (Nationwide, Halifax, FirstDirect)?
- why do you have it?
- the date you opened this account / pension / mortgage
- the interest rate you receive, and
- how much you think think is in there at the moment.
What Do I Do With This Information?
The list of assets and liabilities is a financial register.
You have a birds eye view of everything in your possession; if you cannot measure it, you cannot improve it. In my financial workouts we'll look at how to optimise each asset or liability.
To start, look to create goals against each of line items:
- is there any debt I could / should pay off? I’ll cover this in a later blog, but, the interest you pay out on debt (i.e. credit cards, and overdraft) tends to be higher than interest you receive on savings accounts. Remove debt from your life where possible; you’ll mentally feel a lot better from doing it as well.
- do I put enough aside into my pension for "future me"?
- could I put that money in my ISA into a better option?
Photo from the beautiful unsplash.com