There’s a well-known saying that ‘what you focus on will increase’.
And it’s never more true, than when it comes to money.
But it’s also really easy to focus on the wrong things!
So which numbers SHOULD you focus on? What should you actually be looking for?
Well – of course, you can track how much money you’re bringing in. And a business owner or entrepreneur, this is usually the obvious starting point. Tracking your monthly and annual revenue and the sales you’re making.
It’s obviously crucial to track your expenses as well, so you have total clarity about how profitable your business really is. This is the stuff that your accountant will help you do as part of a routine management meeting.
But wealth isn’t just about how much money you earn. There’s SO much more to it than that.
What are you doing right now, to hold on to and grow all that money you’re making (if anything)?
How are your personal assets and income looking?
A great starting point is to first understand your net worth, the money and assets you currently have.
By keeping track of your net worth over time, you can check that you are building assets and accumulating some degree of wealth, instead of just making money.
There’s a range of apps and products you can use – but a spreadsheet is as good as anything! You can even grab a notebook and write it there if it gets the ball rolling. The key here is to just get started – because that’s what will change your life – rather than spending hours hunting for the perfect tool.
How often you track your net worth is up to you. I’d suggest looking at it every quarter, as a minimum (some people like to do it more often than that).
So here’s the simplest way to track your net worth, so you can focus on growing it!
Grab your notebook or set up a new spreadsheet and create yourself 2 columns.
Column 1 = Assets
In this first column, write down everything that you own that is an asset. I don’t mean all your stuff – by assets, I mean the things you own that hold a value if you were to sell them or pass them to someone else.
It might include things like your home, your car, jewellery or works of art. You can either add them up or itemise them out (which will definitely help you build a clearer picture).
- How much money have you got in your current account/s?
- What about your savings fund?
- How much is in your pension?
- What about ISAs?
- Do you have any other investments?
Add them all to this first column and then add everything up at the bottom!
Column 2 = Liabilites
Next up, we need a second column to look at your liabilities.
This is any debt you have and money you owe to others.
Often, these will correspond to an asset (like a mortgage on your house or a car loan), but not always (like credit cards, other bank loans and overdrafts).
For your mortgage, log in to your mortgage account, check what the balance is today and use that figure. If you can’t get an online figure, you can use your last mortgage statement or give your lender a quick call.
For everything else, if you have an account with a credit scoring website (like Clearscore or Equifax), you can see balances for all your credit cards, loans, overdrafts and so on all in one place. Which can speed the process up, rather than hunting around for your most recent statements.
And then again, at the bottom of the column, add all your liabilities up.
Get your net worth figure!
Now it’s a simple matter of subtracting your liabilities from your assets, to get your current net worth figure.
If you set this up as a little chart in a spreadsheet, it’ll obviously do this calculation for you.
And then look at your figures again and adjust them, next month or each quarter, to make sure your net worth is heading in the right direction!
Over time, you should see your net worth increase naturally, as you pay off loans and mortgages and start to put money into savings, a pension and investments.
The simple fact is that more you focus on this, the more it will help your net worth grow.
How would it feel to have an emergency fund of £50,000, for example?
Would you feel more secure if your income unexpectedly took a dip (a global pandemic will do that!) or if you suddenly needed to pay for a new car or major home repairs? If you or a family member became unwell and couldn’t work?
Let’s be real here. If your savings account has less than £500 in it – which is true for 85% of people in the UK – that kind of money is not going to magically appear in your account overnight.
And if you do set a target to have £50k in savings by the end of 2021 – it’s completely doable! But you’re going to need a plan to do it, with some milestones and markers to keep you on track along the way.
The same goes whatever the priority is for you – clearing off your debt, paying off your mortgage early or saving for your retirement.
This is a key part of the Wealth Builder Experience – my signature 6-month 1:1 programme.
We begin with a fabulous in-person day together, where we map out what you want to achieve with your money; the target dates you want it by and your personal plan to get there. Followed by meetings over the next 6 months to support you to actually get things implemented!
As with everything in business, having the right people in your corner – and being kept accountable to take action – is the key to success.
I’d love to support you to grow your net worth in 2021 and beyond!
Until next time,
Claire