Quick, without cheating, what's the balance in your 401(k) (or other work retirement account)? How much money is in your checking account? What did you spend on food last week?
Stumped? (We'll assume so by that blank stare.) Then it's time to Buffettize your finances.
There's no better model of a competent, hands-on CEO than Warren Buffett. Here's a guy who can practically recite his company's annual report -- and five years' worth of his personal checkbook entries -- verbatim. And we're only partly kidding. In one interview, Buffett recalled puzzling over a $4 income item on his latest tax return. A $4 item! From a guy who is worth more than $30 billion!
Today, take the 15 to 20 minutes required to begin a self-audit. Use your computer, checkbook, abacus, or all those fingers and toes to add up your major assets and liabilities (fancy terms for what you own and what you owe). Simply write down the balances of the following items:
- Checking accounts
- Savings accounts (including money market accounts and CDs)
- Brokerage accounts
- Retirement accounts (including IRAs, old 401(k)s, that secret Bahamian stash)
- Home equity (if you own a home)
- Short-term debt (credit cards, student loans, and auto loans)
- Long-term debt (mortgage)
Now see if you can answer these questions:
- Is your net worth increasing?
- Is your debt growing or shrinking?
- Are you shocked by what you see? Appalled? Elated?
If you can't determine what direction your money is going (up, down, or haywire), use this simple money rundown as a starting point for your personal audit and repeat it next month when you have a baseline for comparison.
While the fire of Buffett is burning inside of you, start improving your shareholder's (or family's, in this case) long-term value. For the next month, we're offering free access to TMF Money Advisor, where you can get an analysis of your personal balance sheet and one-on-one advice from an independent source.