How to begin the net worth game

How to begin the net worth game

Benvenuti a Firenze! You've landed safely, had your orientation and are adjusting to a new culture filled with new opportunities. Now let's talk about your budget! Sound like what you came to Florence to do? Certainly not! But since you've already shown your adventurous side by crossing

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Wed 17 Sep 2008 10:00 PM

Benvenuti a Firenze! You’ve landed safely, had your orientation and are adjusting to a new culture filled with new opportunities. Now let’s talk about your budget! Sound like what you came to Florence to do? Certainly not! But since you’ve already shown your adventurous side by crossing the Atlantic, why not go a little further in making this adventure abroad one that might positively change your life? I’m going to give you some easy things to do while you are in Florence that will help prepare you to work well with your money throughout your life. Then vedremo che cosa succede (we’ll see what happens!)

 

Step 1: Just think about it

Whether you realize it or not, you have a relationship with money. Everyone does. What exactly is a ‘relationship with money’? Do this exercise. Grab a pen and paper, sit on the steps of your new favorite Florentine church and answer these questions: What is money to me? How do I feel about money? When I have money I feel … When I don’t have money I feel … Write continuously until all your thoughts are on paper. Reread it and circle any thing that reflects emotions or a strong perspective. These are indicators of your relationship to money.

 

Without knowing how you feel about money, you can’t have a healthy relationship with it. Money is not just colorful paper or interesting coins. It is far more complex than that. Once we accept this, we can begin to partner with money differently. We can start to work with it with more awareness about the emotions that affect our actions.

 

Step 2: What are you worth?   

What is net worth? It is your financial status at any given time. Your assets (what you have) minus your liabilities (what you owe) equals your total equity, or net worth.  If you want to end up with more assets than liabilities, which is the goal of the net worth game, then you have to know where you are now. 

 

During your trip, create a document with the title ‘My Net Worth’. You will use this to start asking yourself questions over the next few months so that at the end of your trip you will be clear about your status and in a position to move forward. Write a list of all the things you own (which might be very little at this moment, but every bit counts): savings bonds, bank accounts, car. Then write everything you owe: car payments, loans from family, credit cards, student loans. You might discover that you have a negative net worth, meaning your liabilities are higher than your assets. Don’t worry. At this point in life you couldn’t be in a more powerful position to do something about it. Remember rule number one: time = money. You have time to deal with your money positively. 

 

 

Step 3: Budgeting for life

Okay, so this activity sounds pretty horrible, especially when you’d rather plan your weekend bungee jumping off the Alps. So let’s do this budgeting thing quickly and painlessly. You have ‘x’ amount of money and you want to enjoy your time here. One thing you don’t want to do is create an unnecessary financial disaster. Many of you are on your own for the first time. This also means dealing independently with your finances. Even if mom and dad gave you the Visa and said ‘have a ball’, it’s not going to help your life in the long run. 

 

Here’s what will: knowing that ‘x’ (total funding) – ‘y’ (total expenses) should equal no less than 0 or, in a perfect world, slightly more. However, it should never be a negative number. Or, even worse, a number built on credit card debt. And this, dear study abroad student, is a formula for life. 

 

So what do you do about it? Take a piece of paper, write down where you think your money will go as specifically as you can: rent, food, entertainment, medical, travel, etc. and total it up. If it is more than your funds for the trip, ask yourself where can you cut back without feeling deprived. And you can cut back if you have to. In Florence, you can walk down ancient streets, buy a gelato, stroll across the river and wander through a neighborhood you’ve never been before (try San Frediano!)-at €1.50 for the adventure. Budgets can feel restrictive, but they actually help you to both define your priorities and become creative with the way you live.

 

Follow these three simple steps over the next several months, and you’ll do something that, especially in these tough times, everyone needs to do. The dollar is weak to the euro, and your generation in particular is more pressured toward unfettered consumption-while carrying the highest debt ratio of any generation before you. As hard as it may be to believe, dealing with your personal finances can be fun and, certainly, freeing. So while in Florence, start the net worth game and put yourself in a position to see that number grow over the years. Perché no?

 

 

 

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