The Whole Truth

Do you ever watch the TV program House? You know how he never believes anything a patient tells him?

“Everybody lies”, is House’s line. If people think they are telling the truth, is it really a lie?

In the world of personal finance, everyone is overly optimistic. If you ask almost anyone how much debt they have, unless they have none, chances are their estimate will be significantly lower than the actual number.

Awareness is the first step in initiating any change. Before we can solve a problem (if there is one) we must clearly define it.

Two numbers you should know, that is really know, not guess, are your Debt and your Net Worth.

To determine your net worth draw a line down the center of a piece of paper (or use excel). In the left hand column, we are going to list your assets in the right hand column your liabilities (debt).

Assets-What you own Liabilities-What you owe
Checking Credit Card #1
Savings Account Credit Card #2
401K Credit Card #3
Stocks Student Loan
Home Value ( Mortgage
Car Value ( Car Loan
Other Owed to friends or Family
Total Total

Now the trick here is to really do it. We are looking for the real truth here, not some optimistic interpretation of the truth.

Look up your balances, estimate your car value using Kelly Blue Book. Don’t go crazy trying to determine your home value just pick either Zillow or use your tax appraiser’s estimate.

Go to to get a free credit report, did you miss any debts?

Net Worth = Assets – Liabilities

Is you number positive (good) or negative (not so good)?

Either way your number is not you, it’s just a number that’s going to allow us to track your progress towards financial fitness.

The sum of you debt (liabilities) is the other number you want to track every month. As you use your income to pay off debt, your liabilities number will go down and your net worth will go up.

Write down these two numbers: Net Worth and Total Debt, along with today’s date and post them somewhere you can see them. Set yourself a reminder to do this exercise again next month.

If you really did the exercise – “WOO HOO! YEA YOU! CONGRATULATIONS!”; you’ve taken the first step towards financial freedom.