Understanding Your Financial Resources
The first step in embarking on your savings fitness plan is to take a closer look at your current financial resources. It’s essential to understand how these resources can impact your ability to achieve your goals and protect them from potential financial crises. Your financial resources will also play a vital role in meeting various life events and challenges. To begin, let’s calculate your net worth, a snapshot of your financial health.
Calculating Your Net Worth
Calculating your net worth may sound daunting, but it’s a straightforward process. Your net worth is the total value of your assets minus your liabilities, reflecting your financial standing. Begin by adding up the approximate value of all your assets, including personal possessions, vehicles, home, checking and savings accounts, and the cash value (not the death benefits) of life insurance policies. Additionally, consider the current value of investments such as stocks, real estate, certificates of deposit, retirement accounts, IRAs, and pensions.
Next, tally up your liabilities, which encompass the remaining mortgage on your home, credit card debt, auto loans, student loans, income taxes due, taxes on investment profits, if any, and any other outstanding bills. Once you have both totals, subtract your liabilities from your assets. If the result is positive, you have a net worth in the black, indicating financial strength. If the result is negative, it’s time to focus on building your net worth.
Building a Savings Fitness Plan
Creating and growing a positive net worth should be a top priority in your savings fitness plan. Your net worth serves as the foundation for achieving your financial goals, funding your retirement, and weathering financial storms. Regularly review your net worth on an annual basis to monitor your financial health and progress. It’s crucial to identify any changes in your net worth and address them promptly.
Identifying Other Financial Resources
Apart from your net worth, there are other essential financial resources to consider when crafting your savings fitness plan. These resources may not be part of your net worth calculation, but they play a crucial role in providing financial protection during challenging times. Some of these resources include:
Life Insurance Benefits
If you have life insurance policies, be sure to account for the death benefits they offer. While the cash value is already included in your net worth, the death benefits provide additional protection for your loved ones in the event of your passing. Understanding your life insurance coverage can give you peace of mind about your family’s financial security.
Social Security Survivors Benefits
Social Security survivor benefits provide financial support to eligible family members in the event of your death. Spouses, children, and dependent parents may qualify for these benefits, offering an essential safety net for your family’s future.
Health Care Coverage
Healthcare coverage is a valuable financial resource that provides protection against high medical expenses. Adequate health insurance can prevent medical bills from becoming a significant financial burden.
Disability Insurance
Disability insurance offers income protection in case you are unable to work due to illness or injury. Having this coverage ensures you can continue meeting financial obligations during difficult times.
Liability, Auto, and Home Insurance
Liability insurance, auto insurance, and home insurance are essential for protecting your assets and providing coverage in case of accidents, property damage, or legal liabilities. These policies can safeguard you from significant financial losses.
While some of these resources may require premiums or payments, they offer invaluable financial protection in case of illness, accidents, or other unforeseen events.
Savings Fitness Plan
Beginning your savings fitness plan involves understanding your current financial resources, calculating your net worth, and identifying other financial safeguards. Building a positive net worth should be a primary goal, ensuring a strong foundation for your financial journey. Consider the various resources available to protect yourself and your loved ones from potential crises and uncertainties. By taking a proactive approach to financial planning and securing your financial future, you can confidently pursue your goals and dreams with peace of mind. Remember to review your savings fitness plan regularly and make adjustments as necessary to stay on track toward a prosperous future.
