How to Easily Assess Your Current Financial Situation
Every once in a while, we need to draw a line for ourselves and check how we are doing financially. We can never really sleep well at night without knowing that we are secured and that we have a constant flow of money. The amount needed differs from one person to another, but we all have to determine where we stand financially. There are simple ways that wouldn’t waste time and have been proven to be effective in assessing our economic status. Here’s how you can do that.
Determine Your Net Worth
You’ll want to start by calculating how much money you have after subtracting your expenses. Assets include everything that provides you with income or that can be sold. For instance, any real estate you own, investments, and your monthly income are considered assets.
That said, liabilities are reflected as the money you owe, such as a mortgage, insurance policy, credit card debt, or educational loans. These things take money away from you every month and you are responsible for paying what you owe on time. Ideally, your net worth should be positive, which will make it easier for you to become more stable.
However, if the result is negative, you don’t need to panic because that’s the case for most people. Also, remember that this is only a way to evaluate yourself and to start planning your next months properly to get a higher net worth.
This step is how you determine whether your income is going to cover all of your expenses or not. You should determine the exact amount of money you pay monthly then divide it by the income you receive from your assets. If the resulting percentage is higher than 30%, you should think about where you went wrong.
In this case, you will need to figure out a way to up your income in order to lower the percentage to below 20%. You can search for a side job, start a small business from home, or invest in a new property if it wouldn’t put you in more debt.
It can be hard to stick to a budget or a certain schedule. It can get boring and you will even stop being consistent at some point. But no matter how frustrating it is to be in control of your money, you can find a way to put yourself on a realistic budget that you can stick to and a constant reality check. If you’re unsure how to do that on your own, there are countless apps and software programs that can keep your spending habits in check; these options cost a small fee in exchange for helping you make a change. There are a lot of budget planners online that you can make use of, as well.
If you don’t want to go digital, you can simply grab a pen and paper and write down everything you pay for every month. After that, you will realize that some of the items that you spend your money on are unnecessary and can be cut off without hesitation. You can highlight the necessities and put them as constants while the dispensable ones can be bought when you have your financial situation under control.
The worst moment you can experience is when you find your savings account empty. It will feel like a slap on the face and that you are suddenly left without anything to cover you. Sometimes we get exposed to unexpected situations that we need to pay for. For instance, car accidents and medical emergencies can take away all of our money.
If you don’t start taking money out of your income and add it to your savings, you will go around asking people to lend you when you get hit with life’s twists and turns. That’s why walking on the safe side of the road and saving money should be your priority.
Set Up a Goal
We all need a purpose to live and to make money. If we let ourselves go with the flow, we will lose enthusiasm at some point in our lives. Sometimes the fast pace of life sweeps us away and we don’t stop to figure out whether we are going in the right direction and towards our goal or not. That’s why we should set multiple goals, and every time we reach one of them, we have to give ourselves credit for it and jump into the next one.
We all seek independence and we can never achieve it without being financially stable. We should take a break and review how we are managing our finances and whether we should make a change or stay on the same track. It may not be easy, but we have simplified it for you so you can always stay under control.