Taking a Clear Look at Your Finances

This might be a tough week, as we are applying our Clear Sight theme to money by taking a clear look at your finances. Most of us try to hide from money and not look at it, because it can bring with it a lot of fear. Though I know this is going to be hard to believe, not looking at it is a lot scarier than looking at it. I managed to not look long enough to accumulate more than $40,000 in credit card debt, and even the idea of looking made me want to throw up. Once I finally clearly looked, I felt a deep sense of calm empowerment. I can handle a problem I’m willing to see, and so can you. So, let’s do this – you might find there is no problem after all.

I’d like to invite you to use the frame suggested by Jo Pillmore in Changes of the Heart. The book is a collection of chapters by Martha Beck coaches, each one dedicated to a different topic, and I would happily recommend it for Jo’s chapter alone, “You’ve Just Been Elected to The Board: Direct Your Life Like A Million Dollar Business.” In this, she suggests a whole weekend getaway to take a clear look at your money. I’ve done this, and loved it. For our purposes this week, I’d like to borrow her idea and ask you to look at your money as if you were a member of the board of directors of a corporation. This helps enormously to take the emotional charge out of the situation, and can get you from “I can’t believe I’ve spent so much money at Target” to “How can I reduce my supply costs?” pretty quickly.

So with this frame in place, I invite you to choose one of the two options (though ideally you would do both) for this week’s activity. Each can take anywhere from fifteen minutes to several hours, depending on the complexity of your situation and the state of your organization around money.  I’ve created some files to help you do this – an Excel file with two tabs, where you can enter amounts and it will calculate totals for you, and two PDF files for those of you without Excel. (Get the Balance Sheet or Income Statement.)

Image courtesy of James Barker / freedigitalphotos.net

Option #1: Create a Balance Sheet
Some people call this a “net worth” statement, but I can promise this has nothing to do with your worth. Since I’ve spent years as an accountant, we’re calling it what it is – a balance sheet. Basically this is a check in on all of the money that you have in various forms, any physical things you own, and all of your debt. Whatever remains is considered to be ‘owner’s equity’ – and ideally you’d like that to be positive. That would mean that you are able to pay off all of your debt with the assets you currently have. If it’s negative, you can start working towards bringing it up. For now, we just want to see where you are.

Option #2: Create an Income Statement
This is basically a way to see how you are spending your money monthly. The file has a section to record any income you make monthly, and a wide variety of expense categories. Since I’ve included savings as an expense category, ideally you’d like to end up with a zero balance for income minus expenses. You might end up seeing that you are spending more or less than you are making. Again, this is not a time for judgment, this is just an exercise in awareness.

Still with me? Congratulations! You’ve just taken a HUGE step towards seeing your financial picture clearly. You might be asking what to do now, and my honest answer is celebrate, no matter what results you saw. You did an amazing job, and from here you can start learning more about money, and what you’d like to do with it. We will have a post on financial vision coming up next month, and I have a whole series of resources I will be posting in Facebook over the coming week. Please come like Soul Warriors if you haven’t already to be sure you get those feeds. (If you’re not on Facebook, send me an email at [email protected] and I’d be happy to send you a list of resources that I like.)

Leave a comment and share one thing you learned from doing this exercise.