Not many people have a strong idea about where they are financially. They often have a superficial idea, but no more than that. They’ll know, for example, how much their work pays them each month. How much travelling costs them. Whether or not they’re paying more than they need to for groceries.
But really getting to know how you’re doing financially requires looking at things in a lot more detail. And actually doing something to improve your financial situation requires these details. You may think you’re finances are in good shape. But if you take the time to look at them properly, you may find a different result.
Here are the things you should be considering as you investigate!
What assets do you have?
A lot of people don’t consider the things they own as “assets”. Or, rather, they don’t fully understand how their belongings play into their financial health. There are a lot of things you own that have value tied up in them. For most people, the biggest and most obvious asset is their property.
There are a lot of other assets, though. Your car just about counts, even though you probably won’t make more money than you paid when you bought it. Anything you own that will have increased in value should be considered the most.
How is your income doing against your monthly costs?
Look back through your bank statements. I’d say that a good look through the last six months of your bank statements will do. Your monthly salary payment will probably jump out immediately as the biggest incoming payment.
Figure out how much money you’re spending every month. Compare that figure to the combined figures from incoming payments that you’ve received. From this, you should be able to work out some average ‘income vs outgoings’ amounts. Are you losing money faster than you’re making it? You should figure this out sooner rather than later.
Have you considered talking to a professional?
It’s definitely a good thing that you’ve taken the initiative and are looking through all this data yourself. But if you’re still finding yourself a little lost for concrete answers, then don’t worry too much. One of the leading problems with personal finances is that these things are a lot more complicated to figure out than people think.
But people will understandably be determined to sort everything out themselves. This is primarily because they don’t want to share their personal financial information with others. But if you’re having trouble finding the right answers, consider the services of a financial advisor.
What are your plans?
A good way of figuring out the strength of your financial health is to weigh up your current situation against your wishes for the future. For many people, this will mean looking forward all the way to retirement. How much money do you want to have when you retire? Are you currently on track to make that much?
One of the problems people have when they’re trying to figure out their finances is that they don’t have a specific goal. When you don’t know what direction you’re going in, then it becomes harder to plan your finances appropriately. Figure out how you want your money to work for you.