| A most important element for building wealth is to | | | | it. Simple insights and subsequent rules like these will |
| measure it. The people I know that have continually | | | | help increase your net worth, which will lead to bigger |
| increased their net worth track it in order to direct it | | | | insights and develop into bigger gains. |
| and stay motivated to reach ever higher financial | | | | If you find that you have a lot of debt that is |
| goals. Seeing the quantifiable results of your spending | | | | decreasing your net worth, or possibly a negative net |
| and investing decisions is the first step to take | | | | worth, then what rules about debt are you going to |
| control of them. Contrarily, the people I know in the | | | | create for yourself? After you get some money |
| worst financial shape have no idea where there | | | | saved, where are you going to put it? How much |
| money is spent and are too afraid to know what | | | | time are you willing to spend monitoring it? How |
| their net worth might be because it won?t be pretty. | | | | much effort are you willing to exert to educate |
| Which extreme more closely matches your attitude? | | | | yourself about investing? These questions will aid in |
| As Dr. Deming says, ?You can?t manage what you | | | | building your investing rules. Eventually you?ll have |
| don?t measure.? Think of it: if you were seriously | | | | rules for spending, saving, employing debt, and |
| wealthy, you?d spend some time every week | | | | investing that will shape your personal plan for you to |
| managing some aspect of money. Well, if you want | | | | start moving your net worth in a sharply positive |
| to improve your financial condition, a beginner version | | | | direction. Think about adding a rule to read a new |
| of a money management and tracking method is | | | | financial book each year. Your financial statements |
| required. In addition, the more money you build up, | | | | and financial rules can be as simple or sophisticated as |
| the more financial assets and obligations there are to | | | | you want to make them. If you keep making even |
| monitor. If you don?t have your financial tracking in | | | | baby steps forward, it may become no big deal to |
| place before you acquire them, I?d bet that you | | | | have specific rules for retirement planning, tax |
| won?t own them for long. | | | | implications, entity structuring, evaluating investment |
| If you don?t see and feel the gains and losses of | | | | real estate, checklists for buying mining companies, or |
| your financial decisions ? you are playing the | | | | selling a company you?ve built. |
| complicated money-game of life without any | | | | When you have calculated your first statement of |
| scorecard. This is how so many people with decent | | | | net worth, you start having the ability to plan for |
| paying jobs and insurance still get into financial trouble. | | | | purchases and payments. As a simple example, if |
| You need to have navigation reference points to | | | | your auto insurance bill arrives once a year, you can |
| know if you are steering toward building wealth or | | | | calculate how much money that you need to set |
| destroying wealth. It is by monitoring your net worth | | | | aside each month to easily pay it when it arrives. Or |
| that you?ll start to uncover the financial impact and | | | | if you are getting a new car, you?ll be a lot happier |
| consequences of your decisions. | | | | planning for the initial costs before you get squeezed |
| The starting point for financial measuring is a simple | | | | at the end of the month and end up paying a few |
| statement of net worth (or balance sheet). If you | | | | bills late. |
| have never heard this term, it is a list of the current | | | | After you get comfortable with a net worth |
| market price of everything that you own and what | | | | statement, you can move on to an income & |
| you owe to others. The difference between these | | | | expense statement. Then move on to making |
| two numbers is called your net worth, and this is the | | | | projections for all of your statements. And creating |
| number that you want to measure and increase | | | | scenarios such as: How much is a reasonable goal for |
| every single month. | | | | retirement income for you? How much net worth will |
| As with a business, once you start measuring the | | | | you need by when? How are you going to increase |
| financial consequences of your behavior you can | | | | your income, increase your savings, increase your |
| begin making your own personal spending rules. For | | | | investment returns? The answers will be built upon |
| example, if most of your monthly income is spent at | | | | the financial habits, tools and education that you?ll |
| restaurants, try making a rule that you only go out | | | | develop, but it can all start with your first net worth |
| twice a week. If you?re spending too much money | | | | statement. |
| on gasoline you need to find several ways to reduce | | | | |