Black Enterprise magazine has a feature every month in which it takes a real household and lays out its finances, then gives the household $2,000 and some advice from a professional advisor - that is my favorite feature of the magazine. I am inspired by seeing how people are able to manage their finances, deal with liabilities, and increase their assets. (I haven’t tried to get the $2,000 because frankly, I’m too embarrassed to discuss what I make and how much I owe in front of all of Black America.) But last year I started to actively track my financial progress by using a chart similar to Black Enterprise’s. It first lists assets, the value of each, and the total. Then it does the same thing with liabilities. Finally, it finds the difference between the assets and liabilities to calculate net worth. I did my first calculation back in November 2006. Then I waited long enough for my efforts to show a change, and did my second calculation just this past April. When I finally laid my numbers out in their bold faced truth for the first time in November, it was in order to have a jump off point for conversation with a financial advisor. However, when I saw it in black and white, I was really sobered up - I really had a lot of work to do. I saved it as a file on my computer with the intention of going over it once in a while to see how much I could make my net worth change. I’m going to do the math every once in a while - every three or four months - to track my progress and to congratulate and encourage myself for seeing the benefits of all of this planning and budgeting I’ve been doing.
Here is my chart from November 2006:
Assets
Value of Car 15,615
Savings 260
Checking 185
Total 16,060
Liabilities
US Student Loan (2.6%F) 55,895
Student Loan (8.5%V) 6,168
Car Loan (6.9%F) 17,350
Credit Card (24.9%V) 2,436
Credit Card (17.25%V) 5,422
Total 87,271
Net Worth -71,211
Thank God I have made progress in the last several months since this chart was made. I spent some time this weekend thinking about how proud I will be the next time November rolls around. The next time I do a chart (which will likely be sometime in September after I make a few dramatic changes), I’ll post it for comparison. I just wanted to post this one so readers could see how drastic the situation was when I finally got up enough nerve to start taking real, honest, hard looks at my numbers. Heavy on the debt, low on the savings (I had used almost my entire emergency fund - thousands of dollars - on a relocation and a five month period of unemployment. I’d just started a job about one month before I made this chart). That car loan is upside-down (I owed more than it was worth, and if I’d sold it for its value, I’d still have had loan balance left over). And just look at the high interest rates on those credit cards! Another problem - no retirement funds. No investments yielding higher returns than interest on a savings account. I think that what hurt the most was that my total of liabilities was almost twice my annual salary at the time this chart was made (I earn in the mid 40’s.)
This was exactly the wake-up call I needed to commit to homemade lunches, paying more than the minimums, turbo charging savings and debt repayment strategies, and making those numbers MOVE! I want out of this apartment! I want my own dirt! But there’s no point in saving up for a down payment when the sheer amount of my debt in proportion to my income would keep me from getting a decent interest rate. So here I am, working hard to clean up this chart…
