Do you really know how much money you have? How many assets you have? To key to building wealth is intellectual honesty. Maybe you have tons of overlooked assets, or many you have debts? I have been tracking my assets in the last few years in a google spreadsheet. I make it a monthly ritual, looking at how well you spending is under control or not.
Here's a few things you should consider doing :
6 Month of liquidity
- Keep always 6 month of liquid cash. Imagine you're running your family just like a business. And for businesses, nothing is worse than running out of cash or liquidity. So calculate your expenses to sum to 6 months of cash. Keep your cash in a high-yield saving account, readily accessible. I personally Ally bank and as of now (May 2016) it is offering 1% interest rates.
Track your portfolio and retirement accounts.
I usually just take the lump sum total at the end of the month just to get a snapshot of my performance. I do track my progress a bit differently. Whether you are invested in the stock market or not, tracking performance is key to make sure you can objectively know about your returns.
Track your spending:
Make sure to add your debts. If you have a mortgage, you should add it. The way I do it is the following :
Asset = House value = Mortgage.
You can use Zillow to access the value of your house. However, I found that Zillow tend to overestimate the value of the house (especially in my area).
Here's an example on how I do my spreadsheet: You can use a similar one, and just insert the values you care about.
Finally I also CAD$ conversion rate. Even thought I am pretty sure I will not move back to Canada anytime soon, it's fun to see how your asset translate into a different currency.
From there you can decide whether you need to work on your wealth? Also, remember, in terms of investing you can only persevere your capital and have reasonable expectation of returns. These days this return is about 4-7%. If you're aiming higher, it means you are taking more risks (which might or might not be fine based on your profile). If you need to generated more money than the 4-7%, then you will need to work at it (such as with a job, consulting, business idea, etc... )
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