I remember when I graduated from college, and my first fear was the thought of having to start paying down my debt immediately. I had an idea of how much my debt was, but I did not know the exact amount. Last year, one of the things I learned in the FPU class was the importance of writing down all your debt, savings, equity. After this class, I went home and signed into all financial accounts, and I was surprised to find out the exact amount I owed.
The number was a lot higher than I had imagined. Knowing this number however helped me to establish a plan on how to pay down the debt immediately. It revealed to me the exact amount in student loans (federal and private loans) and credit card debt. It also helped me establish how much I had in savings, and what my net worth was at the time. I remember seeing how much I was worth scared me, and motivated me at the time. It helped me to establish a plan that would take me from a negative net worth to zero, and then build wealth from there.
Ever since, I’ve been monitoring my net worth on a monthly basis. The incredible thing is that it feels good to see my growth every single month. It helps me to recognize how far I have come, and also keep the momentum going. While my net worth is still a negative number, it is a huge satisfaction to know that the number is moving closer to zero, and I’m a lot closer to reaching my financial goal than I was a year ago.
Sometimes we think that we have less debt than we actually have. Writing down the number gives perspective and helps in establishing the best plan to tackle them. It also keeps you accountable to yourself. Do you know how much debt you have? Do you know your net worth? How has that helped you in measuring your progress?