As you go through the transitions of life, how do you know how you are doing? The accountants have an interesting tool for this and it is called net worth. Now, this just measures your financial well-being. Net worth in its simplest forms is the monetary value of your hard assets (those that a bank can put a lien on) minus your liabilities (the money you owe). At any time in your life you want this to be a positive figure. Ideally, you want it to grow every day of every week of every year.

This is where life transitions, life windfalls and life disasters come into play. The analogy that came to me for this is one of the first board games you ever play in life, Snakes and Ladders. You roll the dice every day and move ahead. Sometimes you just move ahead. Sometimes you get a ladder and move ahead much faster than you expected. These are the windfalls in the game of life. And then there are the snakes. These are the disasters. I always hated to hit one of those 2 snakes on that top line. You hit those and you go back to the 40 and 50 line. Life can be the same. You can play with this analogy all you want. The point is that rarely is the growth of your net worth a straight line or an arc that curves to a vertical climb. Sometimes it may fall in value. Life is a seesaw battle and you have to take some chances and that means testing your judgment. With better judgment, you can miss those snakes going down and catch a few more of the ladders. This is one of the ways where the life and the game differ. However, the snake of chance is always there with the ladder of chance.

So always keep track of what you are doing. This is part of the rule of money that says; know where your money comes from and where it is going. Companies have month ends and year end accountings to do this very thing. They want to know exactly where they are at any given moment. You need to as well. As you practice tracking net worth, you get to the point that you intuitively know whether you are gaining or losing.

You have seven facets of your life. They will have their ups and downs as well. There are different ways to track those as well. Your financial life needs to be in balance with those other facets of life and their needs. That is why you have to sometimes relax when your net worth goes down. You may be investing in another facet of your life that will allow your finances to rise again at a later time.

It is very complicated and a lot of life’s decisions require good judgment and by this point in this book we all know where that comes from. Life is about learning so live. The money part is easy if you THINK YOUR MONEY. It is managing it in the context of the rest of your life that is hard.

Summary: You keep score of your money with your net worth balance sheet. Know where you are through the transitions of life. This should be easy compared to managing the other 6 facets of your life.