If you want to feel more in control of your finances this year, these are the numbers you need to know.
Tally your assets first: How much do you have in your bank accounts? What are the current balances on your retirement and investment portfolios? How much would your home be worth if you put it on the market tomorrow. Then add up what you own on things like your mortgage, student loans, credit card debt and auto loans. Subtract the second total from the first, and that will give you your net worth.
Knowing your net worth will help you determine your spending and saving requirements in the next year. Your net worth should grow over time, even though there will be years where growth won’t be substantial.
You know your salary, but how much do you actually bring home? “People aren’t intimate with that number and tend to overestimate how much they make after taxes,” says Rachel Rabinovich. “Peek at your paycheck and note the frequency. Biweekly means you get 26 checks a year; bimonthly means just 24.”
Now that you know how much you take home, make sure you use that money to support your goals. Many financial planners suggest the 50-30-20 rule: half your take-home pay should go toward needs, 30 percent toward wants and 20 percent toward savings and debt repayment.
Three main credit bureaus—Experian, TransUnion, and Equifax—maintain your history which financial analyst firms use to crunch your score. Get your score through Experian at freecreditscore.com. Once you know your score, the best thing you can do to increase it is to pay your bills on time and reduce your debt.
Your savings should reflect your financial goals, taking into account both short and long term. Depending on your financial situation, it is recommended you have three to six months saved for a rainy day. As for your retirement, it is suggested you save 15 percent of your salary.
If you have a mortgage, you should review the terms of your loan and check with professionals on whether or not it is wise for you to refinance. Additionally, if you use credit cards, you should know each card’s interest rate, and make it a priority to pay off those cards as soon as possible, as credit cards can undermine your financial goals quickly.