8 Critical Personal Finance Numbers You Need To Know
8 Critical Personal Finance Numbers You Need To Know
Do you know your financial status?
If not, you’re not alone. A recent Gallup poll found that only 32% of Americans have a household budget. Furthermore, a recent Bankrate survey found that 55% of Americans don’t think their financial situation will improve this year, with 44% who think their situation will stay the same and another 12% saying they think their situation will get worse.
While you may feel your financial situation won’t improve, you are guaranteeing it won’t improve if you don’t know where you stand or if you’re actively ignoring your finances. Like any path taken in life, you need to know where you’re starting so you know how far you’ll need to go before you reach your destination. Every journey has a beginning, and you must know yours.
It’s important to be able to accept the things you did know, didn’t know, or ignored that have impacted your current financial situation. Only then can you build an effective financial plan.
You can start your journey any place or any time, but more importantly, start now.
Here are 8 critical personal finance numbers you need to know no matter where you are on your financial journey.
8 Critical Personal Finance Numbers You Need To Know
1. After-tax Income
The first critical personal finance number you need to know is your after-tax income.
This means you must know what money you’re actually putting in your pocket every month (net) as opposed to your overall income (gross).
For those that are salaried, simply look at your paycheck to see what money you’re taking home every month.
After-tax income will be harder for those with a variable income or who freelance, but close estimations can still be made. Plus, if you’re income is variable, it’s essential to know how much it varies when making other financial decisions so you don’t overstretch yourself.
Knowing how much money you actually have to allocate is the first step in taking control of your financial situation.
2. Monthly Expenses
Once you know how much money you have coming in you need to determine how much money you have going out. You also need to make sure you’re covering all your necessities and not overspending for non-essentials.
They only way to truly know what’s going out each month is to build a budget.
Many think of a budget as restrictive, but really it’s simply a way to track what you’re spending each month and on what. Once you know how much money is going out and for what, you can make changes based on your goals if needed.
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