How To Understand Where You Stand In Terms Of Your Finances
If you want to know where you are today financially and where you want to go tomorrow and how you can get there then you need to evaluate your financial situation. For someone like you who wants to be financial independent it is important that you should take right decision at the right time. You would miss the opportunity if you fail to make decision and take action for your financial well being.
Before setting financial goals, you should understand and evaluate where you stand today in terms of your finances. Listed below are few points which can help you assess your financial condition. Go through them carefully:
1. Your net worth:
Net worth represents the total value of your assets minus the total value of your liabilities. This also means the percentage of your resources which you can use to meet some financial goal. Having a positive net worth is good. The higher your net worth is, the better are your chances of being financially independent. If you have negative net worth then you should not worry. You can increase your net worth by increasing your assets and by reducing your debts. So, net worth is the complete measurement of your wealth.
2. Your credit worthiness:
Using FICO scores obtained from lending institutions, you can determine your credit worthiness. Factors like punctuality of payment, length of credit history, types of credits that are currently used, ratio of total revolving debt available to total revolving credit available, recent searches on your credit history etc affect your credit scores.
3. Assets that you own and their value:
Your bank account, investment accounts and tangible personal property like house, car etc together forms your assets. In short, assets mean anything that you have and that has value.
4. Your liabilities:
Liabilities mean how much you owe. All form of debts like credit cards, loans, mortgages, home equity lines of credit etc come under liabilities. Calculating liabilities you can determine the current amount that you have to pay off. This will also help you to understand how much it would cost you.
5. Your income:
Evaluate how much you earn. Your income includes your salary and benefits that you receive from your employer. Track your gross income and get idea about regular cash inflows.
6. Your expenses:
In order to calculate where you are spending, try keeping track of your expenses for several months.
Before setting financial goals, you should understand and evaluate where you stand today in terms of your finances. Listed below are few points which can help you assess your financial condition. Go through them carefully:
1. Your net worth:
Net worth represents the total value of your assets minus the total value of your liabilities. This also means the percentage of your resources which you can use to meet some financial goal. Having a positive net worth is good. The higher your net worth is, the better are your chances of being financially independent. If you have negative net worth then you should not worry. You can increase your net worth by increasing your assets and by reducing your debts. So, net worth is the complete measurement of your wealth.
2. Your credit worthiness:
Using FICO scores obtained from lending institutions, you can determine your credit worthiness. Factors like punctuality of payment, length of credit history, types of credits that are currently used, ratio of total revolving debt available to total revolving credit available, recent searches on your credit history etc affect your credit scores.
3. Assets that you own and their value:
Your bank account, investment accounts and tangible personal property like house, car etc together forms your assets. In short, assets mean anything that you have and that has value.
4. Your liabilities:
Liabilities mean how much you owe. All form of debts like credit cards, loans, mortgages, home equity lines of credit etc come under liabilities. Calculating liabilities you can determine the current amount that you have to pay off. This will also help you to understand how much it would cost you.
5. Your income:
Evaluate how much you earn. Your income includes your salary and benefits that you receive from your employer. Track your gross income and get idea about regular cash inflows.
6. Your expenses:
In order to calculate where you are spending, try keeping track of your expenses for several months.
