Early retirees track both their net worth and annual spending… and you should too!
Why? Because those two pieces of information are critical to evaluating your current financial situation and understanding what separates you from your financial goals.
Retiring early takes meticulous preparation, a willingness to sacrifice temporary comfort, and consistency. Every financial decision must effectively move you closer to your goal or you run the risk of failure.
Ignorance about your net worth hampers your ability to make certain financial decisions wisely. It may cause you to save less, if you assume your net worth is closer to your retirement goal than it actually is. When the time comes to retire, you’ll be in for a shock!
Failing to monitor your expenses can lead to a similar outcome. What if you never identify the expenses that eat up the majority of your cash flow? You might swear off lattes or designer clothes, but you might miss bigger saving opportunities. There’s a reason that so many early retirees cut back on housing, transportation, and food–they’re the biggest drains on cash flow!¹
Here’s the takeaway—imitate early retirees and regularly evaluate your net worth and spending, regardless of when you plan to retire.
Knowing what you’re worth and what’s eating up your cash flow empowers you to make effective decisions that bring you closer to your lifestyle goals.
What’s your financial status? How close are you to achieving your goals? And what’s standing in your way?