Financial

Financial Health: 6 Easy Ways to Assess Accurately

You have regular physical health checkups, but when did you go for a financial health assessment? You do not always have to depend on an accountant to understand your financial position. Instead of being oblivious to your own expense account, rise to the occasion. In this article at Money Under 30, Chris Muller shares six tips to measure your financial health.

Review Your Financial Health

Evaluating financial health seems a long-drawn and overwhelming approach. The very thought stops people from assessing it further. After the initial head-scratching episodes, you will get the hang of it. Here’s how you can determine your financial health regularly:

Net Worth

Assemble all your assets (home) and subtract the expenses (debt, bills) to get your net worth. The comparison should be between you and you and never about another individual. Positive results are better than negative ones, do not worry if you are running into losses sporadically. Aim to increase net worth by 5 to 10 percent per year to balance financial health.

Net Worth = Assets – Expenses

Debt-to-Income Ratio

Add all the debts you pay every month, like car and student loans, mortgage, credit card bills, and so on. Now, divide the total debt sum by the gross monthly salary. Then multiple with 100 to get the percentage or ratio. The debt-to-income rate should be less than 30 percent. Investigate if it is more than 50 percent.

Ratio = (Loans + Mortgage + Credits) / Gross Monthly Income = Division Result x 100

Housing

A 2017 study indicates that U.S. citizens spend 40 percent of their income on housing expenditures. That is $24,000 per year if you draw an annual salary of $60,000! According to experts, you should not spend more than 30 to 40 percent of your budget on housing. Go for cheaper rents and get a roommate to share the expenses for sound financial health.

Expense Checkup

You must know where you are spending your money rather than staying in the dark. If you want to save up, have a weekly or monthly budget in mind and stick to it. You can also use budgeting apps to regulate your expenses. However, it is your will that would stop you from overspending.

Investment

Are you investing more than you can afford? That can dampen your financial health. Despite earning to make a balanced living, you will be struggling to make ends meet. Prioritize your emergency funds, and then start checking the investment sites. Keep in mind your risk tolerance levels and if your investment aligns with your life goals.

Financial Goals

You should associate a purpose with your saving habits. That would drive you to save the exact amount without letting go of your current financial position. For example, you can abstain from buying junk food to save money for a Paris trip.

To view the original article in full, click on the following link: https://www.moneyunder30.com/simple-steps-to-evaluating-your-financial-health

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