Do You Know Where You Are now Financially?
This is an article that is talking about the financial self assessment that will let you know where you are financially. This is the most basic step for our giant financial goal. So let’s see how we can do it.
When comes to money or personal finance, people will think that the main problem that they are having now is not enough money. They just blame and think that all the financial problems are because of not enough money. So in order to solve the problem, they just keep finding the ways to make more money.
However making more money does not solve our financial problem. Good financial planning and money habits are the way to solve our financial problem. Without them, even though you make millions of dollar, the same financial problem will still follow you.
There are many ways to get started in financial planning and people are confusing with it. However, it will be easier to make the plans if we know where we are now financially and understand all the strength and weakness that we have in our finance. This is why a simple financial self assessment is very important and we must make it as the first step before we make any financial decisions or plans.
Financial Self Assessment
Now let’s get started with the financial self assessment so we can understand where we are now financially. I’m going to show you the financial assessment that I learn from The Cashflow game, a product from famous book author, Robert Kiyosaki. We will use the same theory of financial statement in the game to do our self assessment. This is the simplest and easiest to understand financial statement that I ever read.
Without further ado, here are the steps for financial self assessment:
- Collect all the data. First you need to collect all the data such as your incomes, expenses, bills, bank statements, assets, liabilities and etc. Yes, it might be troublesome to do so, however, don’t worry and just do it. It will be getting easier as you go on and eventually it will be your habit one day.
- List down your data properly. Now please list down all the data you have collected in a piece of paper or type it out in your excel file. There are actually 4 kinds of main categories: Incomes, Expenses, Assets and Liabilities and all you have to do is categorize all your data according to the categories.
PS: According to the book Rich Dad Poor Dad, Assets are something that put money into your pocket and liabilities are taking out money from you. So please use this concept to determine your assets and liabilities here. - Put a value and add them up. Now give a value to all your data. List your income, expenses, assets and liabilities and give a value to each of them. After that add them up and get a total figure for each category.
- Analysis over the figure. Now you should have all the needed data listed properly. Then we can do some calculation or analysis the figure and find out what is the “health level” of your finance.
Analysis that you cannot miss….
So with the data you have right now, we can go through some calculations and analysis to find out how wealthy you are right now. Below is some of the analysis that is important for you:
- Net Monthly Cashflow – First, you deduct the total expenses from your total income. The balance will show you how much money you left each month. This money is very important as it is the extra money that you can use to build your emergency funds, savings, investment and etc. Of course, your job is trying your best to make this number increase positively. To do so, you must learn how to increase the income and decrease the expenses or manage your money wisely.
- How you make your income – How you make money? Through a job? Through a business? Or do you have incomes from business and investment. No matter how you make money, it is quite dangerous if you depend on one kind of income to survive. What about you loss the income? Can you imagine this? So your target is trying to find more income source or build multiple income source of income. For example, while working for somebody, you can start a part time business or invest your money in real estate and generate extra passive income.
- How you spend money – Are you paying multiple credit card debts? Do you own a car that you cannot afford right now? Do you spend so much money to buy something that not really necessary? From the expenses column, you will find the answers. Like what I said just now, it is important for you to learn how to spend and manage your money properly. Make money and spend money have to work side by side. It is risky If you make $100,000 per month and you spend $99,999 or more.
- Assets VS Liabilities – Which one has more value? This is the first question that you must ask yourself. Well, I can say that there are plenty of people have more liabilities than assets. However, for a good and healthy finance, you must own more assets than liabilities.
- Paying too much of debts – Now look at your expenses and liabilities sections, Are you paying too much of debt? If you are paying more than 20% of your income for debts, then you are having too much of debts and you must figure out a way to reduce it.
Conclusion
The purpose we carry out a financial assessment is we must know where we are now financially. If we have too much of debt, then we must make a plan to pay them off. If we spend more than we earn, then we must pay attention on our spending habits. If we have more assets and high income, then we just carry on what we are doing now or even increase the speed. Different condition will have different kind of actions plan. This is why I said financial assessment is the basic step for our big financial goals.
8 Debt Signals that Tell You How Serious is Your Debt
Synopsis: People can’t get out of debt because they don’t know or care about how serious their debts are. It is usually too late the time they realize this.
Before this, I talked about the reasons why people are in debts. After that I talked about how we can motivate ourselves to get out of debt by finding the reasons. Both articles are talking about the mindset preparation for getting out of debt.
In this article, I also want to talk about another mindset preparation – knowing how serious your debts are. In most cases, people tends to avoid the issue of debts simply because they don’t know how serious their debts and financials are. They just don’t know they are living around the cliff and under the hot water. Because of this, most people don’t really take any actions or care about their finance until the problem becomes big enough to catch their attention. I saw a lot of people never control their expenses or manage their money even they are in deep debt. It is really hurt to see that they keep buying unnecessary items while they should use the money to pay off their debts. All this because of they never pay attention on the debts signals.
The Debts Signals
So below are some of the signals that are trying to tell you – You are in debt and please pay attention on it! However, this is also the signals that people try to avoid and deny
- High Minimum Payment. If your minimum payments of all your debts are more than 20% of your income, then your debts are too big.
- You only able to pay minimum payment. Each month you only able to pay the minimum payment for your debt. In this condition, you are fully become a debt slave for the creditors.
- Cash and Debt Ratio is deeply negative. One of the features I found from Mint.com, a free online money management tool, is the cash VS Debt ratio. It simply shows you the ratio between cash in your accounts and your debts. If it is deeply negative, you are in risk.
- You can’t charge your credit card anymore. You already used up all the credit available in your credit card until you can’t charge anymore. You are 100% deeply in debts.
- Looking for a second income/job/business to pay your credit cards. Your main income is not enough to cover both your living expenses and debts.
- Creditors are calling you. Your creditors know how “good” your account is. If they are calling you, you are in financial trouble.
- You are living credit card to credit card. You can’t live without a credit card because you have no cash on hands. In fact, this is a cycle where you keep on charging your credit card and keep adding the debt while you still lack of cash on hands.
- You are worry and avoid looking at your bills. I believe that we can feel the level of our personal finance. So if you are worry or always avoid opening your bills and looking at the figure, actually your subconscious is telling you that you are in danger. So stop cheating yourself and face the problem directly.
As you know, a debt is a cycle. If you don’t do anything, you just get deeper in debt from time to time until you have to declare bankruptcy. Bankruptcy is not a joke because it just a “hell of money” for your life. So before this, please pay attention on every signal that your debts are giving you, feel it and take action to get out of it. It never too late if you start today! In fact you have no reasons to delay or procrastinate, have you?
Lionsaves – Discover Instantly How much You Can Save in Debt Consolidation for FREE
This is a paid review from Lionsaves about their free service. This free service can allow you to discover the best option and find out how much you can save for your debt consolidation.
Deb consolidation is a good way to handle our debts. This is a good strategy if you have a lot of high interest debts that you want to pay off. You can consolidate your debt into the 0% interest or lower interest account and then start paying off the debt with your best effort. Since your interest is lower, most of the money you pay will directly cut down the principal of your debts and hence pay them off faster.
Debt consolidation might sound like a good strategy however it is not easy to decide how and which is the best option you can choose to consolidate your debt. Now Lionsaves knows about this and start to provide a free tool that will let you know the best option for your debt consolidation.
LionSaves– What is it about
LionSaves is about debt consolidation for homeowners. They are helping you to consolidate your debt by refinancing your first mortgage or by a new second mortgage. That’s mean you are leveraging on your home equity to consolidate your debts.
However, depends on condition, consolidating your debts through this way is not 100% work for all people. Not everyone can benefit from this. In order to help you to find out whether this is the right strategy for you, LionSaves provides an online tool that can let you find out consolidate your debts into mortgage is right for you.
Is there Any Catch here?
No Contact info or Sales Call? Is this true?
As you know, there are a lot of web sites provide some kind of free services or free tools to help you. However, you have to submit your minimum contact info such as phone number, email, first name or some credit info in order to use the service. Yes it might be good to use the service for free, however, in fact you are opening a door for sales person to follow up you. For me, this is a catch and I really frustrated with this kind of “selling” contact.
LionSaves is different. They emphasize and promise that they will not collect any information from you or do any follow up sales call after this.
How LionSaves Makes Money?
Ok, let’s face it. LionSaves is running a business and they must make money. So how they make money is another question that you might want to know.
First, a customer uses their free tool to calculate whether he/she will benefit from the debt consolidation. If yes and the customer agree with the suggestion, then LionSaves will provide the service for the customer and from here they make money. In fact, LionSaves is a mortgage lender that offers all the loan option available in the free tool.
Should you have any further enquiries, you can go to their What is the Catch page, FAQ page or contact them if you want.
How to Use the Free Tool?
Ok, it is quite easy to use the tool. It only takes 3 easy steps to do it:
- Enter the information for your debts
- View the personalized results online
- Decide whether you want to take the offers.
In the process, they never ask you to put any personal information.
So all you have to do is just filling up your debts information such as amount, interest and etc. Then they will calculate the results for you. Don’t worry, I have tried it and I can guarantee that they never ask your personal info in anyway.
