Our lives in the last decade or so have become so fast that it has become very difficult to maintain a record of all the expenses that we incur. People today find it very hard to maintain any kind of savings, and the handful who do manage them do not know what to do with them. Living on this planet is not free at all.
It is crucial to find out what you are worth. Someday, you might need money for a rainy day; and you may realize that it would have been great if you had a savings account somewhere. The first step to gauge where you stand financially is to understand that you are worth nothing, while the things you own are your assets.
To understand where you stand financially, you need to find out the total worth of your assets and subtract all the expenses from it. All assets including your house, car, monthly income, trust funds and everything that can be sold for money is your asset.
After calculating your total assets, you need to find out your total expenses. Expenses are the things that you need to pay for; they include utility bills, school fee for children, medical expenses, shopping expenses, and the list just goes on and on.
An ideal situation is when the amount of assets you have, exceeds your total expenses. But, if you end up getting a huge amount for your expenses that is far more than the assets you have, there is a high chance that you have missed some major items on your asset list. Good example could be the car you have had for the last 10 years, or the gifs you got from your parents on last Christmas.
It takes a long while to note all your expenses for the first time and the best way to do it is to maintain financial books and update them regularly. Doing this will help you know how you spend your income and what are the biggest expenses you pay for. Most of the time, people are spending more than they are earning. The gap between the income and expenses in these cases is mostly covered by loans. This is a very dangerous thing to do. Taking a loan means that, instead of saving, you are about to spend something that is not yours and cannot be covered through your income. The only way to fix this kind of situation is to try and reduce your daily expenses, and save money which can be used to pay back the loans. There is a very high chance that you will start cut backs and go a bit overboard, get frustrated by the resulting situation and give up on the whole idea. The best solution in these circumstances is to start budgeting. The plan is to commit yourself to a fixed amount to spend every day, month or year, depending upon the nature of the budget. Monthly budgets are the most effective way to get out of bad financial situations.
Budgets allow you to start saving, by recognizing your expenses and putting a stop to the unnecessary ones. By following these steps, you can manage your money in a much better way.
It is crucial to find out what you are worth. Someday, you might need money for a rainy day; and you may realize that it would have been great if you had a savings account somewhere. The first step to gauge where you stand financially is to understand that you are worth nothing, while the things you own are your assets.
To understand where you stand financially, you need to find out the total worth of your assets and subtract all the expenses from it. All assets including your house, car, monthly income, trust funds and everything that can be sold for money is your asset.
After calculating your total assets, you need to find out your total expenses. Expenses are the things that you need to pay for; they include utility bills, school fee for children, medical expenses, shopping expenses, and the list just goes on and on.
An ideal situation is when the amount of assets you have, exceeds your total expenses. But, if you end up getting a huge amount for your expenses that is far more than the assets you have, there is a high chance that you have missed some major items on your asset list. Good example could be the car you have had for the last 10 years, or the gifs you got from your parents on last Christmas.
It takes a long while to note all your expenses for the first time and the best way to do it is to maintain financial books and update them regularly. Doing this will help you know how you spend your income and what are the biggest expenses you pay for. Most of the time, people are spending more than they are earning. The gap between the income and expenses in these cases is mostly covered by loans. This is a very dangerous thing to do. Taking a loan means that, instead of saving, you are about to spend something that is not yours and cannot be covered through your income. The only way to fix this kind of situation is to try and reduce your daily expenses, and save money which can be used to pay back the loans. There is a very high chance that you will start cut backs and go a bit overboard, get frustrated by the resulting situation and give up on the whole idea. The best solution in these circumstances is to start budgeting. The plan is to commit yourself to a fixed amount to spend every day, month or year, depending upon the nature of the budget. Monthly budgets are the most effective way to get out of bad financial situations.
Budgets allow you to start saving, by recognizing your expenses and putting a stop to the unnecessary ones. By following these steps, you can manage your money in a much better way.
About the Author:
Edwood Woodward is a financial expert. You may contact with him to get debt consolidation services and get his opinions to make financial decisions of your life at http://www.moneysolve.co.uk.
