You need to setup a roution to review your cash flow. First, I would recommend a bi-weekly (once per 2 weeks) review of your cash flow, one at the middle of the month and one at the end of the month. The purpose for this bi-weekly review is to check our regular income and regular payment. In particular, you have monthly payment of mortgage, credit card payment, utility bills, etc, and most of them have 30-day rolling window. During bi-weekly review, you want to make sure that you have got your regular income (e.g.salary) in time, and paid your bill in time.
Then monthly you should have a quick review of your investment income. You want to understand, for example, your stock profilio and their gain or loss. You need to make decision on how to re-adjust your investment.
On quarterly basis, you should review your total financial position. You should add up all your asset, and calculate their NPV. Then, you should calculate your annual IRR, APR, and absolute increase, all from the begining of time when you started tracking. It is also a good time to review your credit score.
Finally, on yearly basis, you should review your cash flow and financial strategy, and make critical decision on any adjustment.
At this point, you do not know how to do most of above stuff yet. We will teach you in subsequent Chapters. The take away now is that you need to get ready to start to do it.
The critical question you need to answer from all above is that how good you are in growing your wealth, which means that we need to benchmark your financial situation. The number I would like to use is 7%. I.e., you want to make sure that the APR of your total asset grows at least at 7% year over year. The reason being that stock market growes at 7% on average, and you want to make sure that you grow at least on average.
When you first started in your career (i.e.,first couple of years after your first job), you should expect 15 -- 20% annual growth rate of your total asset. Then it would taper down to at least 10%. Somewhere at 10 to 20 years into your career, you should cumulated enough financial know-how and career know-how, and should see a major improvement of your growth, say 30% annually. After that, you should be able to keep at least 7%, and well positioned for life.
How do you make that happen ? Make sure you think rich, not think poor, which is our next topic.
