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Financial Planning Series: Step 4 – How to Take a Financial Inventory

Andrew Paoni

Mar 4 2020

2 min read

How much do you own and how much do you owe?

The first step in taking financial inventory is to gather your account statements—this can be physical statements or digital statements that you download online. You will want to know how much capital you have in bank accounts and how much you have in investments such as mutual funds, old and current 401(k)s or 403(b)s, and IRAs.

The second step is to figure out what you owe. This includes your mortgage, car debt, student debt, credit card debt, and more. You will want to know the total amount owed, not just what the monthly payments are.

If you use your credit card to make purchases but pay your balance every month, you probably won’t want to include those amounts in what you owe. Most of those expenses will flow into your overall budget; however, if you run a monthly balance on your credit card, you will want to track those totals and set a priority of paying them off.

Lastly, if you have anything that does not normally fall into the traditional financial assets, you may want to make a note about those expenses as well. If something is not liquid, meaning that it cannot be sold quickly for cash, then you may not want to include it, as it won’t be used to fund your goals.

What you own minus what you owe is commonly referred to as your net worth. The goal is to increase your net worth over time through investing and by decreasing debt. We will discuss how to do this when we talk about savings strategies and debt pay down in the next article, Setting Priorities.

View other videos in the series:

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About the Author

Andrew Paoni

Andrew Paoni, MBA, CEPA, CFP®, CFA, specializes in portfolio management and financial planning, helping clients learn how to reach their personal financial goals. Andrew has over 15 years of experience as a financial advisor and assisting clients in spending and saving money efficiently so that they can enjoy a successful financial future.