In the world of personal finance, there are numerous tricks and tips to help you get on track financially. Some of these tips are quick and easy to give yourself a good idea of your standing, but others require a bit more resolve over an extended period of time. Despite differing levels of effort, all of these tips below can help the average financial Joes understand where they stand and where they are going with their money.
Find Your Net Worth
To get an idea of how much you are worth, you need to calculate your net worth. For those who do not know, net worth is how much you are valued in dollars based on what you own. It is the total summation of your total savings, cash, all possessions, and even debt. As a general rule of thumb, you are in good shape if your net worth is positive. A negative net worth means that you owe more in debt than what you currently own. A greater positive value means you are doing well, so make sure you are out of debt!
Figuring this out is simple. You need to add up all of your debt, value of possessions, and money. After that, you subtract debt from your possessions and money. The result is your net worth.
Check Your Credit Score
Similar to net worth, credit score can be viewed as an indicator of well-being. The credit score range starts at 300 and ends at 850. There are many factors that determine credit score. Lower credit scores are viewed as a negative in the eye of lenders while high credit scores serve as a good mark on your record. A decent credit score is anywhere in the 600s, a good score is in the 700s, and an excellent score is in the 800s. Credit score is important because it is a significant factor that lenders and banks consider whenever you apply for a mortgage, credit card, or any loan.
Calculating your score is simple and easy. There are several websites that can figure out your score within minutes. This is an important thing to check off the list when you need to figure out how you stand financially.
Create a Personal Budget
The personal budget is a powerful tool that requires resolve and consistency. It is useful when you need to figure out what you can spend, pay off, and save in the near future. It helps you track your spending, and you can check the progress on your savings. They are simpler to figure out than net worth, and they can be done on a simple piece of paper. All it takes is addition and subtraction of all incoming regular income and debt payments. When you save up these budgets over time, then you can create a good profile of your spending or saving trends.
Invest in 401(k) ASAP
Many companies offer a 401(k) matching company benefit. Retirement is an important and perpetual consideration, so you need to start saving as soon as possible. You can double these savings by investing in a 401(k) while you work at a company. Many companies allow you to transfer 401(k) savings if you happen to make a transition at some point during your career. This is another way to increase your net worth over time.