The free Personal Financial Planning course on Coursera has begun (there’s still time to join), and the first week’s topic is “Where are you? Where are you going”. One of the activities is calculating your personal net worth.

It may seem like a small thing, summing up your assets and subtracting your liabilities, but I am a living example that it does make a difference. I posted my first public net worth on December 9th, 2004:

Assets: *= pre-tax
-----------
Cash Savings: $54,983
Brokerage (non-retirement) $ 7,808
Roth IRA: $ 2,001
Traditional IRA*: $ 5,383
401k*: $11,000
529: $ 1,097
---------------------------------------------
Total: $82,272

Liabilities
--------------
Credit Cards: $26,522

Net Worth: $55,750

(I had a lot of money tied up in no fee 0% balance transfers at the time, with the money safely earning 3-5% interest in bank accounts.)

Now, I no longer share our raw numbers on the internet down to the dollar, but I still track my net worth privately and update my progress towards financial freedom regularly. I definitely think it made a difference, seeing the benefits of a pay raise or debt payoff. A little over 8 years later, our net worth is many times larger and we plan on paying off our mortgage completely this year. Knowing how you stand won’t solve all your problems, but it may give you a reality check especially if you were like me and exiting college well with a 5-figure negative net worth.

As I’m sure someone wise/rich/famous has said – “If you don’t know where you are, then how do you know how to get where you’re going?”

Or the other classic – “If you don’t know where you’re going, any road’ll take you there”

When dealing with other people, it’s always easier when you know what makes them tick. What motivates them? This led to some introspection. What did I really want out of life? I realized that I was probably much different than others. The following characteristics aren’t mutually-exclusive, there is no wrong or right really, as everyone may have a little of each but you may realize one is prominent.

Don’t take the Lego characters too seriously either, eh? I just went to a Lego-themed birthday party and watched Star Wars again. 🙂

Prestige

“I seek the admiration and respect of others.”
 

Power

“I like being the boss and giving orders.”
 

Duty / Honor

“I find a higher calling in serving my religion/country/world.”
 

Passion

“I love my job.”
 

Family

“I want be a good wife/husband/mother/father.”
 

Personal Freedom

“I don’t take orders from anyone.”
 

Path of Least Resistance

“I don’t question the status quo and like to follow others.”
 

I would say that my top preferences from highest to lowest would be personal freedom, family, and duty. I’m still working on starting a family and how to best help higher causes. Low on my list is power and prestige. I don’t enjoy managing others (having people below me in the ranks) or being told what to do (having people above me). I feel this hurts me in the areas of leadership and probably makes me a bad employee. This make me think I should just work for myself. How about you?

Like millions of other people out there, I decided to start trying to lose weight and get in better shape on January 1st. I cut out virutally all meat and was eating tons of fresh vegetables and whole grains. I went to the gym, ran outside, or played sports with friends nearly every day. I rarely ate out at restaurants, and when I did I ordered things like steamed vegetables and brown rice. I lost 15 lbs. within the first month.

Then I hit the wall. I was still exercising almost every day, but I started to dread the workouts. Even worse, I stopped losing weight. I started eating meat again, and adding some snacking back in. I could feel myself losing willpower. I was horrified to discover I had gained weight back.

I knew I had to make some changes. I allowed myself one “cheat day” per week so that I could eat out or drink a beer. I made an exercise routine for the whole week in to be more efficient and starting doing some workouts first thing in the morning before work. I try to only have one big meal a day and the rest much smaller. I acknowledge that I have my weaknesses (like snacking while watching ESPN, and getting hungry after watching Food Network) and avoid doing those activities. I started losing weight again, at a more regular pace of 1-2 pounds per week. More importantly, it didn’t feel like deprivation.

I’ve read that it takes 30 days to break a habit. Well, it took me 30 days to perhaps break my habit, but it took another 30 days to create a new habit that I feel that I can live with for the long run. The best part is the feeling of control that I have now. I know the things I need to do to lose weight. I know the things that I could do that will make me gain weight. It’s up to me. I call this the “I Can Do This” moment.

Applications to Saving Money

Like many other folks, I draw parallels between the actions of saving money and losing weight. In dealing with food, I often tell myself I have 1,500 calories a day to “spend” and so I should get the most value from my calories in terms of flavor, texture, and hunger satisfaction.

When I thought about this, I remember the same thing happened when I graduated college and started earning money on my own. Could I pay down my $20,000+ in student loans? How long would it take? Could I still afford the things I wanted? But the paychecks started coming in, and you started having to balance what was coming in and what was going out. Some things like electricity cost about the same each month, but then you learn to deal with things like car repairs and new computers. Eventually, I reached the “I Can Do This” moment where I felt a connection between my actions and the resulting surplus I had each month.

Here are some observations about reaching this point, which you may or may not agree with:

• When starting a difficult task, it’s good to go all out for a while even if you run out of willpower eventually. I needed that first 15 lb. loss. The same could be said about going on a “no-spending month” and saving up $500 or $1,000. I had built up something that I didn’t want to lose.
• It’s important to see a direct connection between your actions and the results. (At least initially.) This is why I no longer like articles with “52 ways to start investing with $100”. If you’ve managed to save $100 a month, it should go in the bank. If you invest it and one day your $1,000 balance turns to $500, then it affects your emotions and motivation. You’ve just lost 5 months of hard work. With a interest-bearing savings account, the amount will always be higher than yesterday. These days it’s not much, but it’s still higher.
• Routine makes everything easier. Make less decisions. Don’t make every single thing another mental decision. “Should I work out today?” “What about tonight or tomorrow instead?” That’s exhausting. Go to your Yoga class every Tuesday and Thursday. Every. Week. Tell everyone you’ll be there and not at happy hour. Remove the decision. Along the same lines, having money taken out of your paycheck or bank account automatically just keeps your mind from decision fatigue.
• Keep supportive friends. Changing your lifestyle often alienates you from some of your existing friends, and they may see it as a negative judgment upon themselves. They can sabotage your best intentions with their own selfishness, so be sure to find and keep people who support your decisions.

Do you remember your own “I Can Do This” moment?

When I get a little low on motivation, I like to focus on the reasons why I want to earn more and spend less. I found this goals exercise from a financial planner’s website and have adapted very slightly below.

Essentially, you should start listing things you would do with your money. Some popular goals are listed below, but everyone should add their own, delete some, or clarify existing ones. The next step is to rank them from highest priority (1) to lowest priority (12, etc.). (I tried to add some online forms, but it’s probably best to print it out.) No ties! This will force you to clarify your priorities, and think about how you want to live your life.

______ Go back to school, further education for yourself

______ Switch to another new career

______ Start/buy/expand own business

______ Buy a new home

______ Buy a new car/boat/thing

______ Travel extensively

______ Reduce/eliminate debt

______ Set up a reserve/emergency fund

______ Save for retirement

______ Create financial independence

______ Support parents and/or other relatives

______ Contribute to favorite charity/cause

______ Create/leave large estate for heirs

______ Help fund children’s education

______ Provide for dependent’s special needs