Not everyone enjoys managing their money.
Some of us aren’t successful at it, or we just don’t have the time. Whether you’re a financial geek like me or a novice budget buster, there are some basic financial stats you need to know to be successful with money.
Why? Because you can’t achieve your goals or progress financially if you remain uneducated about your finances. Ignorance is not bliss in this case.
Your gross income is what you get paid from your job or your business before taxes, insurance, investments or any other expenses are taken out. It’s your base salary/hourly wage.
Net income is what you receive when you get your paycheck. It’s the income you use to live on, and have available for your household and living expenses.
General expenses can be very broad and can include both essential and excessive spending. By dividing out the essential and non-essential expenses, you can see what you’re really spending your money on.
In the event of a job loss or other life tragedy, you want to be prepared to live on the least amount possible. If you lump the figures together, you won’t know what you can truly live on in case of emergencies.
You don’t need to keep up with your balances every day, but you should at least do a quick weekly checkup. It’s vital you understand the type of debt you have and how to properly manage it.
You want to make sure your payments are being posted properly and that creditors aren’t charging you extra fees. Plus, seeing the balances go down every month is very motivating and will keep you on track toward financial freedom.
The value of your vehicles, houses, property and any other items of value are considered assets. Any cash in the bank, investments and other financial accounts are assets too.
In the event that everything needs to be liquidated, it’s important to know the total value of all your assets.
This is one of the most commonly overlooked financial stats, but it’s very important. Net worth is determined by subtracting your loans (the debts you owe) from your assets (the valuables you own).
If you have more debts than assets, you will have a negative net worth, and if you own more property than your debts, your net income will be positive. The last one is something everyone works toward!
How to be Successful with Money
At the end of the day, knowing your financial standing can give you peace of mind and help you get a grasp on your money. Even if you only look at your finances every month or every quarter, you want to stay in touch with your money as often as possible.
You don’t need to be an expert to handle your money perfectly. Just familiarize yourself with these basic financial figures, and you will be in much better financial shape going forward!
Carrie Smith is the owner and editor of Careful Cents, a blog that specializes in helping small businesses and solopreneurs earn more money in less time through systems and financial organization. She also writes for The Huffington Post, AllBusiness Experts and several other business websites. Connect with her on Twitter @carefulcents.
Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it seven years ago, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering college and professional sports, which are the fantasy worlds of finance. His work has been published by the Associated Press, New York Times, Washington Post, Chicago Tribune, Sports Illustrated and Sporting News, among others. His interest in sports has waned some, but his interest in never reaching for his wallet is as passionate as ever. Bill can be reached at firstname.lastname@example.org.