Tracking your Progress with Financial Snapshots

The path to our destination is not always a straight one. We go down the wrong road, we get lost, we turn back. Maybe it doesn't matter which road we embark on. Maybe what matters is that we embark. -Barbara Hall, Northern Exposure, Rosebud, 1993

One of the best sources of motivation while obtaining your financial goal is tracking your progress. It is always reassuring to see the fruits of your labor as they are progressing as opposed to just seeing the finished product. In addition to that, tracking your progress allows for an accurate evaluation of your current implementation of your strategy and to make sure that you are on track to obtain your goal for your specified deadline. Financial Snapshots are a great tool to use in tracking the progress of your goal.

For more clarification on this topic, let's take a real world example of running a road race. Let's say that there is a 10K (6.2 miles) road race that is going to occur three months from today. At this point, you come up with a strategy and create a plan to be able to finish the race within 60 minutes. So you begin your training regiment and at the end of week one, you are able to knock out 6.2 miles in 70 minutes.

That is a great start, but you understand there is more work to do to obtain your goal. So after week two, you stick to your strategy and after more training, you are now able to finish the 10K in 66 minutes. Great, you have now knocked off 4 minutes in a matter of two weeks.

Now armed with the results of your current plan, you continue to stick to your strategy (since it is obviously working by the current progress that is being made) and after one month, you get your time down to 63 minutes. You can easily predict the outcome for sticking to your plan and charting your progress to see that you have a very high chance of obtaining your goal within the given time frame. These same principles can be applied to our financial situations also.

As you are obtaining your financial goal, you can track the amount you are saving, or the debt that you eliminating and see the progress being made. Now that you have the reasoning behind making financial snapshots, you might want to know how it's done.

Steps to Create a Financial Snapshot

A financial snapshot can be as simple as listing your assets vs. liabilities or as complex as graphs, charts and and mean values. I just like to have a simplistic view of my finances taken once a month to chart my progress. My particular financial snapshots require the following components:

1. Specific allocated time to make the snapshot
2. Google Spreadsheets (excel, pen & paper or accounting software can serve as a great substitute for Google Spreadsheets)
3. Current actual amounts of assets and liabilities

For me, it is as simple as creating a column of assets (including fixed) and liabilities and lastly calculating my net worth. See images below for examples:

Definitions

Asset: In personal finance, current assets are all assets that a person can readily convert to cash to pay outstanding debts and cover liabilities without having to sell fixed assets.

Fixed Asset: A tangible long-term asset such as land, buildings or machinery, held for use rather than for processing or resale.

Liability: An item of value that is part of the overall debt or obligation of a person

Below is an example of my financial snapshot:



All in all, financial snapshots are a simple way to give yourself the extra motivation to stick to your financial goals. They also help to remind you that sometimes it is not about the destination, but rather than the ride that you get to experience to arrive there. As usual, if you have any questions, leave them in the comments below or send them out to the group list. Stay Disciplined!