What is your financial temperature?

Financial temperature is a term used to define one 's personal monetary affairs. Financial temperature has many dimensions including how much savings you have, how much you put away for retirement and how much of your income you spend on fixed or non-discretionary expenses.

However, the net worth of an individual can be quantified simply because he measures the tangible. By tangible like personal property, cash, art works, antiques, jewelry, collectibles, stocks , bonds, rare books, cars, the cash value of entire life insurance policies, 401ks, IRAs and other things that can be assigned a definitive monetary value. Those tangible items are described as the assets of an individual.

On the other side, we have liabilities. These could include mortgages, auto loans , credit cards, installment loans , student loans and, to name a few, tax liabilities. In simple terms, the liabilities represent the debt of a person and other monetary obligations.Since the assets and obligations of a person are dynamic, any calculation of your net worth is an instant snapshot.

That doesn't mean much if you're young and just starting out in life. Chances of your net worth being negative are high. The real value of doing this net worth exercise annually, in my view, is that it forces you to look into all aspects of your financial life. It puts your financial situation in perspective, highlights your mistakes and provides improvement guidebooks. It's just a number, at the end. The real value is to use that number to set realistic targets and adjust spending, savings, and investment habits. At one point in time the net worth is your financial temperature. Use this to sharpen your attention on the creation of goals that will allow you in the future to achieve the net worth you envisage.

Recognize above all that net worth isn't a reflection of your personal interest! I suspect there was a negative net worth on Mother Theresa.

The value of a person isn't measured in rupees. Of course we can't quantify a human being's value and particularly here in a civilized world where we put virtually no limits on a human life 's value. That's why we're going to spend hundreds of thousands of dollars on a quest to search and rescue for a single person lost in the mountains, in the forest, in the desert or at sea. A single astronaut stranded in space could be spent millions on recovering. No, we can not quantify a person's value because that is infinite. However, we can quantify net worth, and this is a biggie.

At a single point in time, your financial temperature is net worth. Use it to sharpen your focus on your goals that will enable you in the future to achieve the net worth you envisage for yourself.

Comprehension and estimation of their net worth is important to certain people and even borders on an obsession. For others, it's almost never something they think about. The happy medium is that you should know the numbers and keep them on top so you can plan and adjust your goals as you travel along the road to retirement and financial security. Yet above net worth is no measure of your value as a human being!

Did you calculate your net worth? Has it helped to explain your priorities and how you deal with your finances?