Step 1: Figure Your Net Worth

Calculate how much you’d have if you sold everything…

Don’t be shocked. Stick with us. This is only an exercise. Once you’ve walked through it, you’ll see the beauty of this straightforward approach.

Think about it this way. If you were to liquidate every asset you own, where would that leave you? What lump sum of capital would you net? Then, next step, invested, what level of yields and dividends might that capital throw off on a monthly basis?

That’s how much money you have to retire.

Longtime friends Vicki and Paul Terhorst retired in 1984 with only US$500,000. That was their total net worth, as Paul explains it, including house, cars, investments, pension funds, and so on. Considering inflation, Paul and Vicki’s US$500,000 in 1984 would be about US$1 million today.

No, you don’t need US$1 million to retire overseas. But, if you don’t have Social Security or pension income to support you, you need to be prepared to adjust your expectations according to the nest egg you have.

So let’s start there. What have you got to work with?

We’ve prepared a simple spreadsheet to help you document your assets and your liabilities, so you can figure your retirement nest egg (otherwise known as your net worth).

The spreadsheet is available here for your reference.

When you look at the spreadsheet, you’ll see two value columns for each line item. The first is for current values, the second for projected values.

Begin by detailing the value of every asset you hold, starting with cash deposits and working your way through retirement and investment accounts and on to hard assets, such as real estate, vehicles, collectibles, coins, precious metals, antiques, jewelry, insurance policies, etc.

Next, itemize your liabilities. Then balance the two to figure your current bottom line (which will show in the Current Total Net Worth cell in the spreadsheet).

This is your starting point.

The name of the game from here is twofold. First, you want to eliminate all debt (if possible). Then you want to move as many of your fixed and other assets up to the Current Assets cells. You do this by selling them off.

Say you own a house right now that’s worth US$300,000. You hold a mortgage on that house for US$150,000. For the Current calculations, you’ll enter US$300,000 in the Real Estate/Primary Residence cell under Fixed Assets. Then you’ll enter US$150,000 in the Current Mortgages cell under Long-Term Debt.

For the Projected column, you’ll remove both those entries and, instead, enter US$150,000 in the Projected Cash in Bank cell under Current Assets.

In other words, for everything that you liquidate (and therefore move from the Current Fixed or Other Assets categories to the Current Assets category), you’re going to reflect the proceeds as Projected Cash in Bank. This does not mean that all proceeds from all asset sales and liquidations will sit forever in a bank account. However, for our purposes at this point, we want to see what you’ve got to work with.

Make your best estimations, asset by asset, using current market valuations (for gold or other precious metals, for your car, for jewelry that you’d be willing to sell, etc.) as best as you’re aware of them. In other words, while the column is titled Projected, this does not mean projected values at some date in the future. It means projected current values if you were to sell today.