Knowing your financial numbers involves several key steps.
1. Track your income and Expenses: Keep a record of all your income sources and expenses. This will help you understand where your money is coming from and where it’s going.
2. Create a Budget! I know! The B word in finance but it’s so needed. Based on your income and expenses, you need to create a budget. This will help you manage your money effectively, ensuring you have enough for necessary expenses and savings. A budget will help you reach your financial goals.
3. Calculate Net Worth: Add up all your assets (what you own, like bank accounts and property) and subtract your liabilities (what you owe, like loans and credit card debt). This will give you your net worth. I know you my approximate or assume what that number is, but again, if you don’t know your numbers, how will you change them? How will you know when or how soon you will be able to retire?
4. Monitor Debt Levels: Keep track of your debts, including student loans, mortgages, car loans, and credit card debts. Aim to reduce high-interest debts as a priority or use the debt Snowball method for quick wins.
5. Understand Your Credit Score: In the US, you need to know what your credit score is, whether you opt to have no credit score and live a debt-free life or whether you have debt that you are using for a mortgage or a business. Regularly check your credit report to understand your credit standing and to see if there are any fraud or mistakes.
6. Plan for Savings and Investments. Set goals for savings and investments. Consider your short-term and long-term financial goals and plan accordingly.
Review your numbers regularly. Financial situations change, so it’s important to review and adjust your budget and financial plans regularly. If needed, consult with a financial advisor for personalized advice, especially for complex financial situations or long-term planning. Remember, being informed and proactive about your finances is key to maintaining good financial health. If you need support or a list of financial advisors, help free to reach out to me.
This post is for informational and educational purposes only. It does not constitute tax, investment, or legal advice. If you are seeking such advice, you should seek the assistance of a qualified professional.
Caroline Clerisme, DMD
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