Tuesday, January 10, 2012

Your Money or Your Life: stumbling on step 1.

I'm beginning to realise why I failed to complete the 9 step program in Your Money or Your Life the first time I started reading it. Here's step 1, Making Peace with the Past:
Part A: Find out how much money you have earned in your lifetime - the sum total of your gross income, from the first penny you ever earned to your most recent paycheck.
WTF? My entire life? Er yes, apparently.
Dig our your copies of old income tax returns. Adjust the figures to reflect any cheating you did - tips you didn't report, jobs that paid you under the table, informal consulting, gambling winnings, gifts from relatives that went unreported [I'm supposed to report financial gifts? Oops], any money you've stolen [what the...?], cash prizes you've won...
...summer jobs you had during high school and college...
... what odd jobs did you have and how much did you earn picking apples, house-sitting, watering the neighbours plants...
Holy baboon-pants! Do I have to mention pocket money as a kid, or the pennies I earned picking gooseberries and red currants in my parents' garden or shelling peas? I had a few babysitting jobs but I'll be darned if I can remember my hourly rate or how many hours I worked. I can't even remember how many months I worked at Vision Express or the various bar jobs I had. This is some serious digging I have to do. And it makes it a bit harder that half of my earning life was in a different country. And that's where all my paperwork is. So I think I'll just start with the last 8 years in Australia for now.

But wait! That's only Part A. There's more.
Part B: What have you got to show for it? For the years you have been working for wages, a certain amount of money (which you just calculated) has entered your life. The amount that is left in your life now is your net worth.
Well that can't be that hard, can it? Not quite sure how I manage the fact that most things are joint owned with Toby. Do I need to include all the income he's ever earned too? But as for figuring out the worth of what I own, surely it's not that hard. I mean, I've got no money and I owe shit-loads on the house. But I own one and a half cars. Well, half of two really as I made Toby get rid of his. But wait! What's this?
Creating a Personal Balance Sheet simply means going through your material universe and listing everything you own (assets) and everything you owe (liabilities).
Simply? Everything? Really? Yes, start with liquid assets then move onto fixed assets and after listing the big stuff (house, car),
Go through your attic, basement, garage and storage shed. Itemize everything, without subjective evaluations like "That's worthless."...
...Go through every room of your house and inventory everything. Look up at those decorative light fixtures. Look down at that rug. How about...
Stop! Enough already. I get the picture. You really did mean everything.

Oh my god! I'm having heart palpitations. I'm rubbish enough at doing this for insurance estimates but absolutely everything I own with "an approximate current cash value"? I'm not to "ignore anything"?

Even the stuff in my mam and dad's loft? Don't answer that.

Okay this is really hard and it's going to take a really long time. Already this has highlighted for me just how much clutter we have. The book talks about clutter as being all the extra stuff you have beyond "enough"; "enough" being what you need for survival, plus comfort plus a few luxuries. Every time you add stuff to your life the benefit (or level of fulfillment) goes down in relation to the amount of money spent. I can see the value in knowing your net worth but I have to ask myself whether the effort is really worth the potential result for me right now. But I've committed to this. I have to do it. However, this is a long term thing. Clearly I need a short term financial plan to reach my goal of $20,000-$30,000 by Feb 2013. It's going to be an interesting walk down memory lane and I wonder what I'm going to rake up in doing it. When I was applying for permanent residency I had to write a CV of everything I'd ever worked on. It took me ages but the things I remembered whilst I was doing it were amazing. Things I thought I'd forgotten that seemed to bear no relevance to work. Songs, friends, nights, moments. So, you know, every cloud...

1 comment:

Crazy Cat Lady said...

Interesting that this is the path that you are travelling.
I have started with YNAB (You Need A Budget) and their whole shtick was to NOT worry about what is past, but what is happening now. This is what I needed as it was a break from usual effort of worrying about historical data and completely burning myself out before I got to the actual business of sticking to/managing a budget.
Good luck with your savings goal, I hope you get there.