The discussion of finances I this manual is not intended to replace professional and legal advice. The variables and laws are too numerous to be covered in a manual of this type. Rather they are designed to give you and your family a simple but realistic financial snapshot so informed decisions can be made later.
Assets, in short, are your possessions. Liabilities are what you owe. Net worth is the total value of you assets minus liabilities. (Assets – what you owe = Net Worth)
Fill out the Net Worth Form included in this chapter this will give you and idea of your financial situation.
List the value of your assets in honest terms of what you believe you can sell them for. The values have nothing to do with what you paid for it, what you want for it, or how much you owe on it- only how much you can get for it now.
You may have paid $175,000 for you house which is appraised at $200,000. However you may only be able to get $150,000 for it now. Even then you have to subtract realtor fees and closing costs.
Early withdrawals from IRA’s and 401(k)’s incur a 10% penalty plus other tax liabilities. Profit from stock sales are also taxable. Before you decide to tap into these, you will want to speak to a tax advisor.
For brevity, the value and debt of any business ventures are on a single line on the Net Worth form. If your business is of good size you probably have an accountant who can provide you with realistic number and detailed advice.
Realize jewelry and furnishings drop dramatically in value once they leave the store. Once again, list only what you believe you can sell it for.
Some collectibles may have increased in value. Do you know who you can sell it to?
You may not be able to sell your car(s) or boat(s) for what you owe. Don’t worry about that right now. All you want to do is get an idea of what you have and what you owe.
Even if you have no intention of selling family heirlooms or other valuables, include them. You can evaluate what can be sold or kept later.
List anyone who owes you money (family and friends) by how much they owe you ( in the high column) and how much you believe you can quickly collect (in the low column). If someone owes you $5,000 but is flat broke, then the collectible amount is virtually zero.
For now list debts at what you owe. You may be able to settle these debts for less, but for right now enter the full debt value. It is from this list you can negotiate settlements. The next chapter discusses ways to arrange reducing the pay-off on eliminate interest.
How is your family to make do without you? You may have a paycheck coming in, but what happens when you report to prison?
Before you can set a budget you need to figure out what your family’s income is going to be without you and what will be there monthly expenses.
This exercise will not only give you a glimpse of a short term family budget, it will also help you see how quickly some assets may need to be liquidated and some non-necessity expenditures being eliminated.
To simplify this exercise only include income without you. Count only the actual take-home pay. List optional payroll deductions such as 401(k) and health insurance in the next column for later evaluation.
PERSONAL MONTHLY INCOME STATEMENT
This form is for the most common monthly expenditures. There is no practical way to include all possible monthly expenses. Think hard about items not included, especially non-essential items.
PERSONAL MONTHLY EXPENSES
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