The road to financial security

Road-Journey 2

Is your personal finance journey just beginning? Or have you recently decided that you need to improve your financial situation? Either way, making the decision to take control of your finances is the first step on the road to financial security. Here are the next steps to take.

Calculate your personal net worth

Make a list of your assets (owned cars and/or real estate, bank accounts, investments, etc.) and your debts (car loans, mortgage, student loan, credit card debt, etc.). Calculate your net worth by subtracting your debts from your assets.

In addition to determining your net worth, this exercise will give you a general overview of your financial situation and make it easier to review all your assets and debts in the future. 

Determine your cash flow

How much income do you receive every month? How much do you spend? How much money do you have left over?

Track each of your income sources and expenses over the course of a month to see where you are spending your money and to get a general feel for your spending habits.

Create a budget

Now that you have gathered all this information, it’s time to create a budget.

Your personal net worth statement can help you determine a goal for your budget. For example, a review of your assets might reveal that you don’t have enough money in your savings account for an emergency fund. Or maybe a negative net worth might inspire you to alleviate some or all of your debt.

Once you have a goal, your cash flow can help you develop your budget. Use it to determine which expenses can be whittled down (the amount you spend on dining out, for example) or eliminated entirely (like a gym membership that you rarely use). Then earmark parts of your income for necessities (such as housing and groceries) and the minimum payment on debts. Allocate the rest of your money for your goal.

Need help?

Need helping getting started? Try using our net worth and cash flow worksheets and guidelines for creating a budget. Or, feel free to leave us a message or contact us for more information.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s