8 Critical Personal Finance Numbers You Need to Know

Critical Personal Finance Numbers You Need to Know

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. Here are 8 critical personal finance numbers you need to know.

1. Net Worth

Net worth is a number that many people are almost never aware of, but it’s an important indicator of your overall financial standing and becomes more critical as you move toward retirement. Put simply, net worth is the sum of your assets minus your liabilities. It’s what you own minus what you owe.

2. Years to Desired Retirement

Another critical personal finance number you need to know is approximately how many years you have until your desired retirement age. This number is important so you know how many years you have to save, and as a result, can plan for how much you need to save to be able to retire at your desired age.

3. Monthly Expenses

There are five major sections to a basic budget. They are: 1. Income 2. Fixed Expenses 3. Variable Expenses 4. Debt Payment 5. Balance Once you know how much money is coming in and going out each month, you can begin to make goals and to tweak your finances to meet those goals.

4. Debt – Total and for Each Loan

You must also be aware of the minimum payments for each loan you have, as that will tell you how much you must pay toward debt every month to avoid penalties and other negative impacts to your financial health. Acknowledging your debt may be difficult and overwhelming, but it’s necessary to know where you are.

5. Savings and Savings Rate

Your savings rate refers to how much of your take-home pay you’re saving/investing. There are many recommended savings rates purported that generally range from 10% to 20%, but you should aim to start wherever you can and then increase your savings rate annually.

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