Top 12 Financial New Year’s Resolutions for 2021
Top 12 Financial New Year’s Resolutions for 2021
By Physicians On FIRE
Happy New Year! Yes, 2020 is over. The no good very bad year that was 2020 is no longer. Thank goodness.
Have you made your New Year’s Resolutions for 2021 yet? Mine include a dry January, avoiding COVID between now and when it’s my turn for the vaccine, and beginning to slow travel once again. I’d like to give you some achievable financial New Year’s Resolutions to ring in the New Year. Each of these dozen items will help you improve your financial situation, and most of them are something you can accomplish, check off the list, and move on to the next one.
Top 12 Financial New Year’s Resolutions for 2021
#1. Calculate Your Net Worth
This is a great place to start. If you want to set financial goals for yourself, it helps to know where you’re at, first. It’s not a complicated equation. You add up your assets, subtract your liabilities, and the result is your net worth. People get hung up on what should and shouldn’t be included. Vehicles? Jewelry? Art? Football cards? You can get as specific as you want, but if it’s a depreciating asset and/or its value is < 1% of your net worth, I wouldn’t bother counting it.
I’ve got supposedly “valuable” football and baseball cards and other junk. Any jewelry my wife owns has more sentimental than monetary value, and that monetary value is a drop in the bucket compared to our invested assets. Our vehicles might be worth $50,000 combined, but they cost money to operate and will depreciate as we use them. I don’t count any of it when I calculate our net worth.
I do count the value of all our investment accounts and properties owned.
We’re debt-free, but if you’ve got mortgage debt, student loan debt, credit card debt, or any other debt, those go in the liabilities column.
I don’t have a pension coming, but I should receive Social Security eventually. I don’t include this in my calculation, but if you’re near retirement and your pension or Social Security appears to be a sure thing, you can find a calculator to estimate the value of that benefit as a lump sum in today’s dollars if you so choose.
I do count the value of my home and any money set aside for college (529 Plans) in my net worth, but not in my retirement assets. If you’re married with combined finances, you should be looking at your net worth as a family, as we do.
The fine details aren’t all that important. Just figure out where you stand today and monitor that number at least annually to ensure you’re headed in the right direction.
Passive Income MD asked, “Should You Track Your Net Worth?” My answer is yes.
To continue reading, please go to the original article here: