Is My Financial Situation Really That Bad?
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.
You need to prepare yourself when you have the chance, or the day might come when you are stuck in a bad situation and wonder how nice it would have been if you had maintained a savings account. The first thing you need to do in order to estimate your financial situation is to keep in your mind that you have zero worth and everything you have is your asset.
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.
Once you have calculated the amount of assets that you have, you now have to find out your total expenses. From the small payment that you make to buy your daily newspaper to the huge amount you spend to renovate your house, that is, everything that comes out of your pocket, will be your expense.
A good financial situation is where the assets exceed the expenses, but if that is not the case, and the expenses come out to be way more than the calculated assets, the mostly likely justification is that a lot of things were not counted as assets. This can be because most of the things you own have been with you for a while, and therefore, you have never considered them to have any financial value. The fact is that everything is worth something, even the gifts that you get from your family and friends.
If you are doing it for the first time, it will be a laborious task to track down your expenses. This is the reason why you should keep updating your financial books, and make sure they are accurate. However, this will give you a fair idea where your expenses are coming from and how your income is being utilized.
At times, in fact most of the time, people spend more than what they earn. This can be due to various reasons, the most common of which is taking loans. Taking loans is the worst thing that you can do to yourself. This means that you are willing to spend more than you earn and spend money that you do not have. When you spend as much as you can, you cannot do any savings. When you are in such a situation, the best thing to do is to cut back on your daily expenses, and start saving, so that you can pay your loans swiftly. When talking about cutting back, if you cut back too much, you may get frustrated and stop cutting back at all. Such aggravating situations call for you to set up budgets. This is a daily, monthly or yearly quota with which you restrict yourself. They are most accurate when you target monthly budgets and follow them thoroughly. Setting budgets helps in prioritizing and recognizing unnecessary expenses. This can help you save enough to invest. Following these steps submissively will make you realize how important money is and how you can best take care of it.
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.
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