Six Numbers to Know if You Want to Feel in Control of Your Finances

We’ve probably all heard that you should “measure what you treasure” which is just another way of saying that if something matters to you, it’s worth keeping track of. Way too many of us, though, simply don’t monitor our finances that closely, which is why we often feel out of control. Knowing these six numbers will give you a real feeling of being in charge of your money, even if you’re still very much working on getting your finances in perfect order.

Your (Real) Income

We all get a shock when the first paycheck from a new job comes in and it doesn’t seem to match the salary we were promised, at all. Knowing exactly what your monthly income is, after tax, pension contributions, and all other deductions is crucial. Your take-home pay is what you actually get to spend each month and is obviously what your budget should be based on.

Knowing exactly what your after-tax income is can be much easier for those in a regular job than those who are self-employed or freelancing, but it’s equally important for both. I’ve talked before about how to budget on an inconsistent income because there’s a lot to consider. If your income varies from month to month, and you also have to pay your own tax, health insurance, etc., then it’s even more vital to track this number carefully so you know what you earned last month, what your tax and other contributions are, and therefore what your budget is for the coming month.

Your Net Worth

Your net worth is simply the value of all your assets, minus your liabilities. Assets may include money in the bank, investments, retirement accounts, your house if you’re a homeowner and any major possession you could sell for cash, such as a paid-off car. Liabilities are then everything you owe, including your mortgage, student loans, credit card debts, and any other outstanding loans and debts.

If you’re young, don’t freak out if (or more likely when) you realize you have a negative net worth. Student loans, along with things like car loans and a little consumer debt, will do that to you. That’s partly why you want to monitor it. As you pay down debt and start investing for your future, that number will shift into the black, and it’s a pretty satisfying feeling.

Your Debt

Knowing how much you owe is really important, and one of the numbers we’re most likely to bury our head in the sand over. But knowing the total amount you owe and your interest rates on each debt can help you manage that debt and pay it off consistently. Whether you’re using the snowball method or the avalanche method, you’ll need to know your numbers in this area in order to make a plan. I’m a fan of always aiming to pay off your highest interest debt fastest, so that’s why you need to know your exact interest rates.

Your debt might consist of:

• A mortgage
• Student loans
• An auto loan
• Other personal loans
• Credit cards
• Charge cards

Once you’ve got it all listed out, no matter how daunting it seems, it’s way easier to make a plan to get rid of it.

Your Fixed Expenses

Your fixed expenses are the things you absolutely have to pay each month, such as rent, utilities, and minimum payments on any debts. As I’ve pointed out before fixed expenses aren’t always as fixed as we think, so start by reducing anything you can, then get it all down on paper, or digitally, so you know exactly what the cost of survival is for you each month. This lets you see if you’re living beyond your means, if you need to make bigger life changes to reduce fixed expenses, or if you really need to earn more. It will also give you the next number on this list.

Your Disposable Income

Your disposable income is what you have left after paying all those fixed expenses, and it’s kind of where the magic happens. How you handle your disposable income is what can make you wealthy, or poor. And even happy or sad. Don’t be fooled by the term disposable. You certainly don’t have to dispose of this income. In fact, the less you dispose of the better, in terms of future financial security.

Your disposable income is for saving, investing, and spending. It’s how you save for a dream vacation or wedding, but it’s also how you save for a down payment on a home, a Master’s degree, or the funding to start a business. It’s for investing, in whichever way makes the most sense for you, and if you don’t know, it’s well worth talking to a financial advisor. Your disposable income is also for spending, but mindfully, so it truly enhances your life.

Your Credit Score

I’m of the opinion that people often obsess too much over their credit score, to the point that they do stupid things in the name of building it. But, tracking your credit score and other important related figures like your credit utilization rate can help you improve that score over time, and you do, of course, need a healthy credit score for all kinds of reasons. Tracking your credit score can actually be highly motivating as you pay down debt and get your finances in order. It’s another number that it can be really satisfying to see steadily rising.

If you have these six numbers to hand, I can almost guarantee that you’ll feel more in control of your finances and better equipped to set goals to improve them, no matter where they are right now.

Karen Banes is a freelance writer specializing in entrepreneurship, parenting and lifestyle. She writes articles, website content, ebooks and the occasional award winning short story. Her work has appeared in a range of publications both online and off, including The Washington Post, Life Info Magazine, Transitions Abroad, Brave New Traveler, Natural Parenting Group, and Copia Magazine. Learn More About Karen