Part 2: Define Your Starting Point

Get your FREE sample of the 100 Steps to Financial Independence Book here

After setting your goals to Financial Independence, the next part of your journey is to determine your current starting point. With those two things together, i.e. where you want to get to and where you currently are, it’ll be a lot easier to plan out how to achieve your goals.

Part 2: Define your Starting Point

One common obstacle to achieving financial independence is consumer debt. Most people have some type of debt they have to deal with and pay off, such as student loans, credit card debt, car loan and / or a mortgage. The first step in determining your starting point is to list all of your debts with their current outstanding amounts (i.e. what you still owe) and then total those amounts to get an overall amount.

While debts represent the negative side of a financial picture, most people also have a positive side: their assets or possessions that are worth something. This can include anything from a house to a savings or investment account as well as antique or art of a certain value. Do the same as what you did with your debts: list anything you own along with its estimated value and total those amounts.

With these two numbers you can now calculate your net worth: a very useful indicator of how healthy your personal financial situation is. Simply take the total value of all your assets, then subtract the total amount of debts you have to find your current net worth. Note that this might be a negative number!

Lastly as part of determining your starting point, it’s a good idea to get a solid overview of your current expense patterns. Not only does this help to see where your money is going, it will also come in useful when you start setting goals later on in your journey for the various financial areas we’ll be looking at. Start logging your expenses on a daily basis to get a good idea of what you spend your money on.

Find some time today to look at the tasks above to complete to keep progressing on your path to Financial Independence!

The above is an adaptation of part 2 of the 10 parts in the guidebook to Financial Independence100 Steps to Financial Independence: The Definitive Roadmap to Achieving Your Financial Dreams where you can find more details as well as action plans and guidelines to each of the 10 parts. Available in both ebook and paperback format!

Coming up next: Part 3 of the Journey to Financial Independence!

Part 1: Set Your Financial Independence Goals

Get your FREE sample of the 100 Steps to Financial Independence Book here

When you start your journey to financial independence there’s a lot to consider and go through. There might be many new things you’ll end up learning about or just points you had never really thought about before.

To avoid you feeling overwhelmed and to provide some structure to your path to FI, I’ve divided the many topics into 10 smaller parts, to help you get started on your journey to Financial Independence.

Part 1: Set your Financial Independence Goals

Before you set out on any new adventure, it’s often helpful to take a step back and think about why you are embarking on that new mission. What are you trying to achieve?  What aspects of your current situation are you not as content with and would you like to change? How would your life change for the better? Once you know why you are starting  this new journey, it’ll work as a motivator to get back on track anytime you find yourself veering away from it.

Once you know your reason, it is equally important to define what your new situation would look like when you get there. What is your end goal? What are some of the milestones that you would need to achieve before reaching that final destination?

It often helps to state your objectives as clearly as possible and to visualise exactly what that would look like. Instead of thinking you would like to have more money, define why you want that money, how much you want, what you would do with it and picture what your life would look like.

Here is an example of what that might be:

“I want to have more money so I can spend more time with my family being outdoors. In particular, would need X amount of money to buy a small condo in the mountains. During holidays and for long weekends we can just drive up to our second house and enjoy our time together out in nature.”

Lastly, an important aspect of part 1 of your journey is keeping track of your progress to financial independence and motivating yourself to stick to your targets. You can do this by creating a vision board with your goals, by creating a tracker of your progress as well as by celebrating each time you reach one of your smaller milestones along the way.

Find some time today to look at the questions and guidelines above and then note down some of your answers to them to get you started on your path to Financial Independence!

The above is an adaptation of part 1 of the 10 parts in the guidebook to Financial Independence100 Steps to Financial Independence: The Definitive Roadmap to Achieving Your Financial Dreams where you can find more details as well as action plans and guidelines to each of the 10 parts. Available in both ebook and paperback format!

Coming up next: Part 2 of the Journey to Financial Independence: Define your Starting Points