Move #1: Investigate Your Finances

This is it.

Your start to financial liberty begins here. When I first starting sketching out the 9 Moves program, there were a lot of things I wanted to include. On a macro-level, I wanted to make sure that people got a clear understanding of each Move while also understanding the why, the how, and the what, in that order. 

A lot of financial plans are rigid and do not conform to everyone's lifestyle. With our program, you will get a true understanding of your own personal finances while having a rockin' plan that conforms to your lifestyle. That's a big reason we use percentages instead of fixed figures. Everyone's income level is different, so everyone's financial plan should be different. 

It is important to remember the following things while you are going through the program: 

  1. Each Move is important, so you need to make sure you've completed the task list (the what) items at the bottom of each Move. 
  2. Understand the why, how, and what for each Move. Don't just take my advice, make sure the advice registers with you and that you agree with it. 
  3. Have fun. Finance isn't supposed to suck, so we try to make it fun. It's important, though, that you remember there will be sacrifice up front. Success is the byproduct of hard work.

Now that my song-and-dance is out of the way, let's dive into Move #1. 

THE WHY

Investigating your personal finances is similar to the blueprint stage of a construction project. You need to make sure you have all needed knowledge before you build. Likewise, before you start throwing together a budget, you need to have all of the details. To do that, you investigate. This investigation is important because you don't want to get six months into your financial plan and realize that you forgot about some medical debt that was in collections. Or that there was an old student loan that slipped your mind. Investigating is important. Without it, you have no financial plan. 

THE HOW

There are five key areas that you need to look at as you start on this adventure: 

  1. Income
  2. Expenses
  3. Debt
  4. Insurance
  5. Assets

Many people are afraid to look at their full financial picture because of the damage, but let me tell you from first hand experience, you will feel much better once everything is on paper. Once it is all listed out, there is no more guess work. Everything is there for the you to see. As a quick aside, if you are married, this is a great thing to do together. Financial plans do not work unless you are all on the same page (pro-tip). 

Let's walk briefly through each of these five areas.

Income. This is simply what you make. Is it weekly, bi-weekly, monthly, or irregular (self-employed)? How much do you make per month gross (top line) and how much do you make monthly net (take home)? You will want to include all household income that is at your family's disposal. 

Expenses. These are the things that people cringe over. Once had a gentlemen do this exercise and he discovered his eating out expense per month was roughly $1,600 (and he did not make over seven figures). These will be your month-to-month expenses and I recommend you divide your expenses into fixed and variable categories. Fixed expenses are things that don't change and you must pay: rent, electric, gas, food, etc. Variable expenses are things that change monthly that are not necessary: pocket money, entertainment, and frequent habits (smoking, nightclubs, eating out). 

Debt. All of your debt payments are fixed expenses, but they should have their own category. However, I want you to organize all of your debt in the following way:

Debt Type | Owner | Balance | Payment | APR

This will help you keep things straight. So an example would be: 

Student Loan | Sallie Mae | $24,000 | $375 | 7.9%

If you do this with every debt, you'll get a clear picture of what you're working with. Make sure you total your total debt balance as well as how much you pay in debt payments every month. Also, if you have debt that is in collections, separate that from your active debts as we can work with that separately. 

Insurance. This is one that people don't touch on a whole lot in financial planning, but having an independent insurance agent look at your premiums may save you a large amount of cash. In the summer of 2016 my wife and I switched to an independent agent and saved over $500/year on our premiums. You'll want to make sure that you document each type of insurance that you have and what the coverages and premiums are. 

Assets. This part is straight forward. This is where you list your vehicles, home, 401(k), miscellaneous retirement accounts, savings, bonds, and the whole nine yards. This is so you can see if you need to sell a car to get out from a $500 payment, or if you need to liquidate a mutual fund account to stop a 22% APR loan. This is the last leg of Move #1, and once it's done, you will feel awesome. 

THE WHAT

To checkoff Move #1, you will need to ensure that you've written out in careful detail:

  • Income
  • Expenses
  • Debt
  • Insurance
  • Assets

Once you've done that, you are now free to press forward to Move #2