Most new investors do not understand how to write a good investment worksheet. It is imperative that every investor, even those who have been investing for years, take the time to review this piece of information as it will save you time, money, and aggravation. You must understand the concept of net working and why it is so important before you go any further.
Your investment worksheet should consist of your Net-Worth. This is basically the amount of money that you own minus the amount of money that you owe. It may seem like a difficult concept, but it is actually a rather simple concept. Essentially what it boils down to is how much money you can pay and still have money left over.
The reason for this concept is that most small businesses will require large loans and at times will not be able to manage the money on hand. This is because you must have cash on hand before any loan is granted. But if you cannot get a loan before that time, then your business will be dead in the water. Therefore you must have money before a loan is approved or else it could be a bad idea to ever take out a loan at all.
In addition to the cash flow, you must also keep an eye on your tax return. Payroll taxes, sales taxes, and income taxes all must be paid. There are other issues that must be considered but if you have never had a business before, then you need to begin by learning about these things. Once you understand the concept of tax filing, you will then have a better understanding of your own personal financial situation.
When you have established your Net-Worth, you can then create your Investment Worksheet. Remember that your net worth is the total of your assets minus your liabilities. Make sure you allocate the total amount of money that you have in assets to income. If you do not have enough cash, then you should first cut out some discretionary spending or create a hobby fund to get you going.
Once you have established your goal of building a business, you need to define the amount of money that you would like to be able to invest. The funds that you have available for investments should be kept as low as possible and let the cash flow to do the work for you. Never borrow more than you can afford to lose. This will be your bottom-line number and must be taken care of first.
Finally, you must have a definition of your return on investment worksheet. This is really a combination of your budget, your expenses, and what you intend to do with the profits. Every investor must do their own analysis, but once you have established a return on investment worksheet you will be well on your way to making wise financial decisions.
Of course, if you don’t have enough money, you will not make a profit, but at least you will have an extra dollar or two to spend. With the kind of money that is available to the common investor, you can start a business with a one thousand dollar profit margin, after tax. So you can see that there is a lot to learn. The key to a profitable business is to have the ability to keep your mind open and to always be thinking about the future.