If I were to write a book on personal finance, personal fitness, diet….I would love to call the book
Simply because that is exactly what you need to do with your health and /or your finances. Also only when you take stock of the current situation (i.e. make your balance sheet) will you know how much you have in assets and how much are your liabilities.
Assets: things that you own and for which there is a reasonable market value. If you have some old watches and pens that your great grandfather used, it is likely to have no commercial value.
So all the mutual funds, life insurance policies, your bank balance, your demat account balance, house, car, white goods, etc. are all your assets. Do not forget your PF account, etc. …too. Once you add all this, the total that you arrive at is the TOTAL assets that you have.
Now if you have funded all these purchases OR some of the assets, the money owed on that is called your LIABILITY (LIABILITIES in plural).
Now if you deduct your liabilities from your assets the figure that you get is called your NET WORTH.
Once you know your networth (balance sheet tells you where you are), you should then make your Goal sheet (where you want to go), then see how much you are earning and how much you are spending (Income & Expenditure account), then you make the Cash flow statement (how much of cash you received and how did you use it).
ONCE you have all the 4 documents (properly filled up) you will know:
a) your networth
b) your income and expenditure
c) the journey – the financial plan which tells you how to go from ‘where you are’ to a ‘where you wish to be’…
What you have done, is just taken charge of your financial life!
So go and take charge!!
And why did I say ‘defence personnel’? Simply because I was talking to a retired person from the army. He said the only thing we are told is to go and ‘Take charge’ – we never take charge of our finances! So if you are a soldier, from the army, navy or air-force, go out there and take charge of your money. It might be the last frontier for you!
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