Let's Draw Your Financial Picture
Step 1: List out what you Own (Assets)
You need to keep a tally of the things you own, their approximate value (the closer to real value the better), and if they gain value as the years pass (appreciate) or if they loose value as the years pass by (depreciate). A few examples:
I own a house: I bought it for $500,000 1 year ago, now its ballpark around $515,000 (a 3% increase, or appreciation since 1 year ago).
I own a car: I bought it for $30k new, 2 years ago. Its now worth $24,300 (a 10% decrease year-over-year, or a depreciation of 10%).
I own some stock for 1 year. I put 10k in it, and its still worth 10k. This represents no appreciation or depreciation)
I have $3000 in the bank in my Chequing account. This is also an important Asset: Cash, which we need to keep track of.
Step 2: List out what you Owe (Liabilities)
Just like you did for assets, you need to do for your liabilities. You need to keep a tally of the things you owe, and the value that is still owed, and the interest rate (and type). A few examples:
I have a fixed-rate mortgage liability that I owe. It currently has $450,000 owing on it, and I have an interest rate of 4.6%. The mortgage has 25 years to go to be fully paid off.
I have a car-loan that will be paid off in 7 years. Interest rate is 1%, fixed payments, and was for $30,000
I have a credit-card with a balance of $5000. Interest rate is 20%. I want to pay it off in 1 year.
I have a Line of Credit with a Balance of $25,000 interest rate is 8%. I want to pay it off in 10 years.
Step 3: List out what you Earn (Income)
Now, you need to list all the sources of how you make money. Right off the bat, you have Job income (your salary), but there might be others to include (like consulting, or stock dividends). E.g:
Job (Salary). Lets assume we take-home $4000 per month (notice its take-home, not net-pay. For now, lets just talk take-home money, since that is real-cash you can do stuff with).
Step 4: List out what you Burn (Expenses)
For doing the expense calculations, its usually easiest to look at your bank statements for a few months, and pull out the common-same items that regularly occur. For example, car insurance, gas for the car, food, Internet, Rent, etc. Note: Notice that a mortgage payment is not included here. In fact, don’t include any of the loan payments you need to make, this is because the WealthNav app figures out what portion of those payments are truly expenses (the loan interest), vs. the portion of the payment that actually reduces whats owed on the loan (the loan principal). Another note, its easiest to sum-up the common expenses, and add some averaged amount of money on top of that to account for odd-ball expenses that show up once and awhile (for example, clothing costs, Christmas gifts), and just call this total: “Monthly Expenses”. And example:
(Per Month)
Car Gas: $200
Car Insurance: $150
Internet: $100
Phone: $100
Food: $400
Utilities (Heat, Electric, Water): $500
Other (gifts, clothes, ect): $250 (averaged)
Adding it all up: $1,700 in monthly expenses (on average)