The Single Most Important Exercise for Your Financial Health

I have been tracking my Net worth consistently for the last 26 months, and it has been one of my highest leverage activities financially.

I reduced the overwhelm and made the exercise quick and easy by:

1. Focusing on the liquid assets. I don't update the latest values for the fixed or immovable assets every month.

2. Targeting the big items covering around 90% of assets rather than recording every penny.

In my first month of the exercise, the insight that hit me was how poor my asset allocation was.

Most of our financial worth is distributed across these five major buckets:

1. Cash & Bank

2. Investments

3. Retirement

4. Fixed/Immovable assets

5. Liabilities

A lopsided distribution across these buckets can be a significant obstacle in reaching your financial goals.

However, depending on your stage of life and financial goals, there is an ideal allocation across the buckets.

Chances are, the first time you do this exercise, you will immediately find opportunities to improve your distribution.

In my case, my assets skewed to Cash & Bank and Fixed assets. Not very hard working for me.

As I continued to track my net worth every month, I started adding meaningful goals and monthly actions. Most of this change in my behavior happened passively.

It's like taking a health checkup not once but every month. As you see the results, you can't help but start taking action to improve.

Confidence that comes from clarity and a sense of being in control was the other side benefits I experienced.