This archive report was first published on 11 January 2020.
Crucial Numbers to Know for Financial Freedom ¶
January 11, 2020
Many of us are clueless when it comes to the fine details of our personal finance. We focus on earning money and spending it, but neglect to take a keen look at our financial situation. However, understanding some crucial personal finance numbers helps you figure out exactly where you stand and plan a way forward.
Here are the crucial numbers that you should always know:
- Net Worth: This is the sum of your savings, investments, and valuable assets minus your debts. It's an important indicator of your financial standing.
- Net Income: This is the amount of money you earn after deducting taxes. It's essential to know your net income to make informed financial decisions.
- Monthly Expenses: This includes the money for rent, utility bills, loan payments, grocery expenses, school fees, and so on. Creating a budget will help you track your expenses and identify areas where you can cut unnecessary expenses.
- Total Debt: This includes mortgage, student loan debt, credit card balance, personal loans, and money owed to friends and relatives. Knowing exactly how much you owe will help you come up with a clear plan to pay off your debts.
- Rate of Return: This is the percentage increase or decrease over your initial investment. It represents what you've earned or lost on a certain investment.
- Years to Desired Retirement: This is the number of years you have to work till you can retire comfortably. It will help you determine how much you need to save each month and annually to achieve your retirement goal.
Understanding these crucial numbers will help you make informed decisions about your financial situation and plan for the future.
