Organize Home Finances and Create Net Worth

Use the home budget spreadsheet to itemize monthly income and expenses. Use the net worth spreadsheet to determine what kind of position your finances are in currently. Save money every month whether it be $25 or $1,000 but you must save something and retain it every single month. Money put away saved is then un-touchable so don’t allocate money that will make the rest of the plan impossible to follow. Budget accordingly to cover all known bills and set aside a fixed amount of carrying cash per pay period, and/or set a debit/ATM limit for yourself per pay period. Download the expense tracking spreadsheet to list all money paid out, most importantly the variable bills such as utilities and also amounts spent per week on gas, lunch, vices (smoking, drinking, impulse items) etc… Track the first month of spending and adjust carrying cash if necessary (because most people don’t realize what they spend until they keep track of it), and then appropriately budget for the variable expenses.

Re-do all three calculations monthly.

- Add 10% to budget for variable expenses to help hold the budget
- In the net worth spreadsheet, deduct 20% from the value of a home or property owned to keep a conservative valuation
- With each house or other property payment, add 80% of the PRINCIPAL paid to the value of that property.
- Regardless of what is paid out in vehicle payments, the value of the vehicle is calculated using the current “private party” blue book value based on condition and mileage of vehicle. To be more conservative use the “trade-in value”.
- Even if it is only a small amount, pay extra. Never pay only the minimum on your credit cards or your mortgage.
- Identify a way to reduce variable expenses for a period of time so that your bills are always lower than expected, and apply that savings directly to credit cards or other loans for principal.
- Aside from increasing your net worth on a monthly basis, a goal should be set to accumulate at least six weeks of income in savings. If you have this amount already, grow it to two months of income.
- If you do not have enough income to cover all bills you need to find an additional source of income and find ways to lower or eliminate other expenses that you are in control of creating. Find part-time work, sell un-needed items, etc.. No investment or savings plan will even come close to the absolute value-creating power of earning income.
- Aim to eliminate bills one at a time and apply that budgeted money to accelerate the elimination of another bill. If you must pay minimum payments on credit cards or mortgages for a short period of time to pay towards eliminating another debt or bill that is within reach of payoff then do it. Once you have two months of income saved and set aside you may for periods of time transfer your budgeted savings amount towards paying off a debt.
- Once debts begin to fall off from the budget you will quickly begin to see higher gains in net worth when you use the extra money to pay off other bills and add to savings.

Net worth is a term usually associated with wealthy people and that is a mistake. Everyone should know what their positions are and how it changes from month to month. A “zero” or negative net worth is common and not cause for alarm but should be brought under control. Note that a gain in net worth from $10,000 to $10,100 is a 1% gain in a month and you need $10,101 the next month to keep it up. This would amount to a 12% gain over 12 months which is a far better investment return than anyone can get with their money right now and that’s only $100 per month, which you might already be gaining from a mortgage payment. Try to stretch this monthly improvement to be as high as it can every month. If you’re in the negative category, changing from -$10,000 to -$9,900 produces a 1% gain in the first month. The advantage if you’re negative is that achieving the same 1% difference the next month and the next month does not require a monthly increase. In fact every month the percentage gained in net worth increases with the same amount of money every month.

Use the following forms to begin getting your personal finances on track:
Home Budget Spreadsheet
Expense Tracking Spreadsheet
Net Worth Spreadsheet