Day 2: Create a balance sheet and determine your net worth

Before you take a single step, get clarity over your actual financial status. You should gain the most comprehensive grasp of your numbers possible. Your goal is to navigate your inheritance as intelligently as possible so it can be the foundation for growing wealth.

 

Figure out your net worth

It’s helpful in this process to sit down and create a balance sheet. To do this, set up a sheet of paper with two columns. You’ll put all of your assets in the first column, such as savings, real estate, investments, jewelry, and of course, your inheritance. This column contains everything you own that you could sell and turn into cash. You’ll record all of your obligations in the other column – that is, your outstanding debts, such as student loans, mortgages, credit card debts, or open overdraft facilities. The goal is to determine your financial status as precisely as possible so you can better plan your next steps. Once both columns are filled in (which could also be labeled assets and liabilities), you’ll calculate what’s called your net worth. It’s really easy – you just have to subtract your liabilities off of your assets, and now you know your net worth. To put it another way: You take your total wealth and deduct all your debts. What’s left over is your net worth.

 

The great thing about net worth is that it makes it easy to track your progress and any financial developments. If you know this number, you can also keep your investments in plain view. Because as you already know from our other courses, you don’t want to leave your assets (your savings, cash, and inheritance) sitting there in your bank account where they’re costing you money. Rather, you want your money to be working for you! The sooner the better – and you’ve already learned how to do that step by step with increasing precision.