
2) Expenses: Do you know how much you spend every month or every year? How much do you spend on groceries every month/year? How about on gifts (birthdays, Christmas, Anniversaries,...), gas, vacations, or cable? Keeping track of your spending every month and then seeing how much you spend in these categories every year will help you view your spending from a very different perspective. After seeing just how much of you hard-earned $36,000 is used up on groceries every year, you may be inspired to take a second look at your grocery shopping habits.
3) Net worth: Keeping a budget or a spending plan is not enough to understanding where you are financially! Calculating your net worth can admittedly be very depressing (as it was for me) but it's also a great way to track your progress (although very slowly) and give you a motivational boost to pay off debt and accrue more assets.
4) Savings: How much do you have in savings? How much do you need in savings? It's easy to get around ever building up a good nest egg for a rainy day but like insurance, if you don't do it, you'll be sorry when you need it. So how much do you need? We've been working hard on building 6 months worth of essential expenses. If one of us loses our job, we will definitely be paying our rent, utilities and other essentials, but we won't be paying for cable or going out for dinner. Six months of essential spending is a good amount to save.
5) Debt: How much do you have in debt? How long could it take you to pay it off? Becoming aware of how much debt you have out there is not much fun, but like calculating your net worth, it can be a real motivational exercise. After you know how much you have in debt, you can start playing with the numbers to see how much faster you can pay it off.
6) Goal money: What are your financial goals and how much will you need to accomplish them? Are you looking to retire ever? Do you know your car will be useless in a few years and will require you to buy another one? It would be smart to save up for these events so if you know what your financial goals are: save for a replacement car, then you can start on achieving this goal by deciding how much you want to spend and when you want to purchase it. Eventually you will need another car and eventually you will want to retire, so you might as well start thinking about it and figure out the numbers.
The point in all this is that knowledge is power. You can go through life not having a clue how much you spend on groceries or not knowing if you have enough in savings in case you lose your job, but ignorance does not protect you against financial hardship. Just the opposite happens: ignorance promotes financial hardship. Don't be ignorant, know your numbers!
Photo credit: Pink Sherbet Photography, Flickr