How Much Worth Are You?

Do you know how much worth you are? 

Do you know how much money actually you have at this moment?

Do you know exactly how much money you spend per month and for what?

Do you know how much money you save per month?

I know you would wonder WTH I am talking about this boring stuff again. Here are my excuses.

I have been reading a book called “Your Money or Your Life” written by Joe Dominguez and Vicki Robin. This book is about 9 steps to transforming our relationship with money and achieving financial Independence, and I am quite enjoying reading and learning valuable thoughts from the book. One of the first steps recommended by the book is finding out ‘How much we worth?’ When I was reading through the chapter, my chicky mind knocked my consciousness that it might be good to exercise instead of only reading. So, I decided to dig out our financial reality. Frankly, I was bit worried that it would take too much of my time and energy but it was far simpler and less time-consuming than I expected. We always worry more than necessary, don’t we?

 

Firstly, I started finding out our income for the last three months (1 Jan 2014 to 28 March 2014). Salary, bank interest, rental income, etc…. Last three month income was quite easy to find as all was recorded in our bank account.

 

Figuring out what is our total saving for the last three months was the second step. It was also not difficult at all as I could extract our saving accounts into Excel spreadsheet by clicking a few buttons. I had to acknowledge that how current technologies make our life easier and convenient.

 

So, what was our total expense? Total income minus total saving equals total expenses, doesn’t it? I have to admit that our case is far simpler as we don’t have any mortgage to pay and no credit card debts to consider. Remember that no debts can make life much simpler and easier so don’t make any debts or clear them as soon as possible.

 

 

 

‘Wow’ was my first reaction when I figured out my balance (Saving (S)= Income(I) – Expenses(E)). I knew that we have been saving as much as possible and trying not to waste anything so, I knew the saving rate would be high but it was a great surprise the see actual number to confirm our efforts. Our saving rate was very close to 80%. Not too bad, is it? If someone is curious about the figure how we made such a high saving rate, the answer is extremely simple and straight forward.  Our income has been grown up steadily during the last decade but our expenses have not been changed from the time we were studying and living on a tight budget. I know many people around me who upgrade their lifestyle based on their salary growth and I easily guess their saving rate would stay same or even worse as very often keeping high standard lifestyle easily overtakes salary growth.

 

When I got the number, I emailed the result to my husband and we shared a nice discussion about our present life and future plans. It was a very simple exercise but the outcome was far greater than I expected so I would like to recommend you to try this whether you are truly interested in getting financial independence or simply want to know what your current financial situation is.

 

I believe this exercise will show you a direction to get a healthy financial position. After getting the actual figures…

 

1.      You will now know what your current financial position is.

2.      If it is good, you can keep your attitude to money as now (or even try to get better for future).

3.      If it doesn’t look good (or serious), you need to find what to fix and how to fix.  It is very simple. Our goal is having positive outcome (S=I-E), isn’t it? First option is increasing income (I) and keeping expenses so, you can have positive figure. Second option is reducing your expenses blow income and third one is increasing income and reducing expenses. As we all know, very often increasing income is out of our control so the best (the most realistic) option will be the second one (reducing expenses). Isn’t it simple?

4.      You now know what to fix so it is time to set up a plan to fix the problems. Set up a short term goal (e.g. 30% saving) with detailed action list (how to reduce your daily expenses). 

5.      You have got a plan so you live on it. I strongly recommend you to record all the expenses for a while until you feel comfortable about your spending habits. There are many free apps (e.g. DEM (Daily Expenses Manager) for recording your expenses on the web so choose and use one for you. 

 

As per my result, I am quite satisfied with our lifestyle and spending habits. The best feeling from this exercise is realizing that we are on a right track. I know some people would argue that they don’t want to scarify their current (high) standard of lifestyle to save little more. Everything is totally up to you if you wish to work 9 to5 till over 65 for feeding your high standard lifestyle and retire with financial burden.  All I hope are you remember that you need to be responsible for your future and better prepare earlier than later.

 

I am very happy to live frugally. Funny enough, when I purchased more things, I felt I never had enough but I don’t really need to buy things to feel enough at the moment. Living less frees my greediness on materials and fills my life with pleasure on small things. I can assure you that knowing your bank account is getting bigger is not too bad either.

 

I have started recording my daily expenses recently and it has been a fun. I try to catch all the expenses not because of I want to know every single details of my expenses, because I want to train my brain to be conscious on my spending.  In the book, ‘Money’ was described as ‘Life energy’ and I couldn’t agree more. We exchange our precious life (time and energy) to earn money so be conscious on spending our life energy and don’t waste it.