Step 1: Where are you?

Mapping your financial landscape

It’s important you know where you stand financially. Where are you today? You may have savings or an invested portfolio. You may be starting to save; You may have received an inheritance; or You may be in debt.

My financial journey began when I was 10 years old with my first job delivering the Sunday Sun Newspaper in Toronto (a very heavy newspaper!). However, it really took flight when I was 16. My father had lost his business in a recession and I suddenly found myself on my own financially. I paid my way through university for an undergraduate and a graduate degree. And although I worked three nights a week throughout school and received grants, I graduated in debt. I was married and had my first child before I was out of debt. However, to get out of debt took lots of thinking, planning and budgeting – it did not happen magically.

Regardless of your stage of life, you need to know your current financial position before you can decide where you need and want to be. Many of us often get tripped up while trying to figure out where we are today. Some of us look for perfection, thinking we need to have every detail figured out before we can proceed at all. Some of us feel overwhelmed by the amount of information we believe we need to gain in the limited time we have available to figure everything out. Some of us might have a mental block about becoming in touch with our finances and end up making financial decisions based on our “gut feeling” or on what our friends are doing.

Tools to determine where you are

To be able to see things really clearly, you’ll need to put together your personal financial statements.  This includes what you own, what you owe, what you earn and what you spend.  I know this may sound daunting, especially for those of us who are not number oriented.  However, it is important to get this information down.   You can do this on your own or with a financial professional.   Use the following links – Your ‘Budget’ and Your ‘Portfolio Position and Asset Position’.  These are Excel spreadsheets I have provided to help you get started. You can fill these in relatively easily and get a pretty good idea of where you are – your starting position.  There is an ‘Example’ sheet to provide some guidance of how to fill in and a sheet for you to put your own information into.

Try to be as accurate as possible, however don’t feel like you need to be 100% perfect. None of us are nor will ever be. Putting the information together will create a simple, straight forward picture of where you are today. It’s better to have most of the picture than no picture: if you are worried about missing 10% of your details before you begin, you are keeping yourself from 100% of your success! Every year you will have more information and become better and better at doing this.

If you have a financial planner or an investment professional that you would like to help you, or you would like to use one to help you, I recommend that you ask them to use these sheets as a summary for their work. Most financial planners are very good at doing their work. However, I am a financial type and I find financial plans overwhelming as there are so many pages – it is hard to see clearly where you are. They just make me tired and dizzy! These spreadsheets I’ve designed are intended to show you where you are quickly and easily – and with as little paper as possible.  And because they are in Excel, you can modify them as you see fit.

The Budget spreadsheet outlines your expenses on a monthly and annual basis as well as how much you earn annually.

  • Many people become stumped by budgets as its hard to remember or know everything that we spend and where.  As well, sometimes we just do not want to know or we may find this chore tedious.  However, no matter how painful, it is really important to do.
  • Start with you home expenses and your credit card bills.  Track this information for a few months and gradually more information will begin to emerge.
  • Fill in the yellow highlighted areas on your sheet under the two current columns within the spreadsheet.  Expenses and income sources at the bottom.
  • From this information you will find whether you are saving or overspending.
  • The reduce or eliminate columns are there if you find yourself in an overspending position.  You can use these columns to change your current expenses to see how your expenses may meet your income.

The Portfolio Performance and Asset Position spreadsheet helps you track your net worth position and the performance of your portfolio:

  • Fill in the yellow highlighted cells in the Inception column to figure out your net worth. Your net worth is what you own less what you owe. When you are completing the inception column, please be realistic with respect to assets like real estate where you have to estimate value – realistic means not too high and not too low.
  • From this you will know whether you are in debt or not and what your assets add up to – your net worth position.
  • The ongoing columns are there so you may monitor the value of your assets and debts each month and thus the performance of each as well as a group overall.

Whatever your circumstance, your budget and your net worth position will allow you to know where you are.  On to Step 2 to determine where we want to go!