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

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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: 

  1. Introduction to Financial Planning
  2. Step 1: How to Start the Financial Planning Process
  3. Step 2: How to Set Financial Goals
  4. Step 3: Making a Budget

Advisory services offered through Sikich Financial, an SEC Registered Investment Advisor.

Securities offered through Triad Advisors, Member FINRA and SIPC. Triad Advisors and Sikich Financial are not affiliated.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

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