Triangulate Your Location and Net Worth
Lost in the wilderness
You took a shortcut in difficult terrain. Now you’re staring at an unfamiliar landscape with no trail in sight. Daylight is slipping away and the breeze is moving from balmy to brisk. What do you do?
You can stay where you are and hunker down until Search and Rescue arrives. You did tell someone where you were going, right? Hopefully you have the proper gear and supplies to wait it out.
Or you can use a few handy tricks to get back on track. Having a navigational aid you trust is key. Here are some tips on how to navigate when life takes you off trail, financial or otherwise.
Know where you are
To get from point A to point B, you have to know where point A is.
If you’re lost, how do you know where you are? “Simple, just use a GPS” you might say. While a GPS tracker is a great tool, what if your battery is dead or you broke it while off-balance? Don’t make success or survival dependent on just one link. Have a back up. Be redundant. Similarly, technology is great for assisting you in the financial wilds, but don’t blindly rely on it.
Using a simple map and compass, you can quickly determine your position using nearby terrain features and Earth’s magnetic field. This is a process known as triangulation.
Did you know that magnetic north is not the same as true north? Your compass can be off 10+ degrees from what you’d expect! A decent compass will allow you to make an adjustment for this declination. Good topographic maps include the adjustment information you’ll need to calibrate your compass. However, did you also know that the location of magnetic north changes? To get the most up-to-date adjustment for where you’re adventuring, visit NOAA’s declination calculator.
Now that you’re correctly oriented, it’s time to find where you are. Pick out at least two prominent terrain features. These could be lakes, mountains, valleys, or roads.
Align your direction of travel arrow with the first landmark and then rotate the compass dial until the red compass arrow is within the two parallel lines (red in the shed). The number aligned with the direction of travel arrow is the heading to the landmark from your location. Using your map, draw a straight line along that heading that intersects the landmark.
Repeat the process with the second landmark and a third if you want to be extra precise. The intersection of the lines on your map is your location. Congratulations, you’re not lost!
Know where you are financially
On the financial side, your net worth is analogous to your location on a map. To triangulate your net worth, start by making a list of all your assets and liabilities using good ol’ paper and pencil. Checking account, savings account, retirement assets, credit cards, student loans, car loans, and so on. This is known as a balance sheet.
Your total assets minus your total liabilities is your net worth.
Paper and pencil is useful as a first exercise, but you can save time by automating this process for the future. Account aggregation tools dynamically create an updated balance sheet for you automatically through a read-only connection with your various accounts. I’ve had good success with Mint (from the same folks that own Turbotax), but there are other options out there as well.
Set a course
Now that you know where you are, you can set a heading for your destination. How long will it take to get there?
For the outdoors, it will depend on the distance, the difficulty of the terrain, and your pace.
The financial answer is more complex because the variables are more uncertain. We’ll dive into this in the future, but here are a few salient points.
The size of your goal is comparable to distance when hiking. Are you out for a marathon or a stroll? Are you working towards multiple goals at once?
Your income and expenses works out to your financial pace. If your expenses are higher than your income, you’re walking backwards!
Unexpected events can happen on the hiking trail and on your financial path at any time. A twisted ankle. A downturn in the stock market. Be prepared. Make sure you have your 10 essentials with you.
Every journey is different, but begins with a first step. You’ve just taken yours. Hike on!