All Topics / Legal & Accounting / Your ‘net worth’ & goals

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  • Profile photo of redwingredwing
    Join Date: 2003
    Post Count: 2,733

    Hope you find this usefull- i did

    Calculate your net worth now

    – write down the value of what you own and subtract the amount you owe. The difference is your net worth.
    Write down the goal for your net worth in 12 months time.
    Think about where the growth is likely to come from (for example, $3,000 from savings from your pay, $400 from growth in investments, $2,000 from an expected tax refund).
    Over a few years you could graph the changes to your net worth.

    The composition of your net worth

    This is the balance between your cash producing and non-cash producing assets. As you approach the end of your working life, you need to replace the income from your job with income from investments.
    You should alter the composition of your net worth to include more cash producing investments – for instance, selling a house to invest and live off the capital.

    Setting your goals

    Calculate your net worth every year
    Goal setting is an attitude to life. It puts you in charge.

    As you go through the process of getting financially fit, you’ll find that goals pop up everywhere. Big, long term goals are where you want to end up. Smaller, short term goals are the steps that help you get there.

    If your big goal is to run a marathon next year, you’ll need a training plan with a number of smaller goals to help you through your training. Your first goal might be just making it round the block on your first training run.

    Getting financially fit is no different. You might have a big goal to own your own house in the next five years. To get there you’ll need a plan that includes a series of smaller goals – maybe you’ll need to save money for a deposit or pay off a student loan as the first step.

    Don’t worry if you find it hard to set long term financial goals for 30 years from now. Set your horizons closer.

    Take some quiet time, when you are not under pressure, to set your goals.

    Be specific, realistic and write each thing down. You might, for instance, set goals like:
    „h Saving $20 a week
    *Paying off your credit card debt in six months
    *Saving for a new car
    *Paying off your mortgage in 15 years instead of 25
    *Increasing your income by $5,000 in the next year
    *Saving $4,000 for an overseas trip next year
    * Maintaining a retirement income equal to 70% of your pre-retirement income.


    Profile photo of peterppeterp
    Join Date: 2003
    Post Count: 307

    Hi Redwing – most timely for me – Dec 31 is the day to look at the portfolio and see how it’s growth over the year.

    I started doing something like that about 7 years ago, and used net wealth as a measure of progress.

    About 12 months ago, I started questioning this approach as being a diligent saver and having $20k more than the previous year (for example) did not mean a great deal in relation to my aims.

    For those seeking financial independence I realised that the most important statistics were:

    1. Passive Income / Living Expenses

    2. Passive Income / Total Income

    Once 1. exceeds 100% (with an allowance for inflation and future living standard increases) and 2. exceeds 50% then you are close to being financially independent. That is of course if you are not servicing large investment loans!!

    Other salient ratios are:

    3. Annual Savings / Annual Income

    4. Yields on investments (%)

    For me 3 has always been very high but my questioning of 4. led me to realise that yields from my portfolio were poor, and that they could be increased through the purchase of property. 4. is also directly linked to 1 & 2 above. The whole aim of investing is to increase these two ratios as quickly as safely possible.

    So these days I look at both growth in wealth and other measures such as proportion of income passively derived.

    Regards, Peter

    Profile photo of redwingredwing
    Join Date: 2003
    Post Count: 2,733

    Thanks Peter,

    We all have to have some means of measuring our progress, as R.Kiyosaki say’s “you have to- Mind Your Own Business”, it doesn’t matter what you do as your day to day job, if you are in the ‘business’ of purchasing IP’s, you need to be aware of your financial position at all times.

    I’m guilty at times of putting statements to one side to catch up on when i’m not busy, not knowing my financial position to the ‘t’ ( even if only monthly), not being aware of the specific day’s the rent’s come in, visting my properties and conversing with my Property Managers more often.. usually i’m too busy working or well… working ( the later on bringing the PPOR up in value and general living duties)

    HEY… now i know my “New Years Resolutions” [^]

    Not Really.. i’ve calculated my Net Worth, including our superannuation- made it look much better than i thought, it is an investment!

    I set some goals for our Net Worth in 2008 (5 years) and set some smaller goals. I also will post our loan statements on the fridge-“motivation” to reduce the loans..


    “The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”

    Profile photo of MonkeybamMonkeybam
    Join Date: 2004
    Post Count: 32

    I ahve to agree wtih redwing, I manage my own properties and am considering taking time off work to do more…also more time to relax. I think property can be a full time job in many respects, I was called on new years eve to fix a leaking tap at 3pm…just the downside of doing your own management…my tennants are great though!

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