Is My Budget Accurate?

• Many people do not make a budget because it is a tedious task. However, a budget is an important tool in financial health and awareness, as it tells you where your money is going, and paints a picture of what changes you need to make with how your money is spent. So, one step to becoming more financially aware is to update or create your monthly budget, and keep it accurate. Track every dollar you spend in a month and divide it into categories, such as bills, mortgage/rent, groceries and entertainment. There are a variety of software tools and programs that can help with this, or you can do it the old fashioned way using a notebook. Then, make a budget plan based on your existing spending habits, and include some money each month for savings, even if that means spending less on personal items or entertainment.
  
  

What is My Debt-to-Income Ratio?

• Your debt-to-income ratio gives you a good indication of your overall financial well-being. To determine your debt-to-income ratio, add up your monthly debt expenses such as credit card payments, rent/mortgage payments and car payments, and divide that number by your monthly income. Then, multiply the answer by 100 to get the debt-to-income ratio percentage. For example, if your monthly debt expenses total $1,000, and your monthly income is $4,000, your debt-to-income ratio percentage is 25 percent. A good debt-to-income ratio percentage is 36 percent or less. Anything above 36 percent indicates that you should either reduce your monthly debt expenses or increase your monthly income, or both.
  
  

How Much Am I Saving?

• Saving is an important aspect of money management and financial awareness. You save for a variety of things later in life, including retirement, college education for your kids, buying a new house or just financial peace of mind. How much you save depends on your age and whether you have already been saving, or if you are just starting to save. Typically, you should save at least 10 percent of your income if you are in your 20s and 30s, or more if you can afford it. As you get older, you need to put more away if you have not been saving from a young age. If you do not start saving until you are 50, you need to put away about $34,000 per year to save $1 million by age 65, but you only need to save $3,600 per year if you start at age 25.
  
  

What is My Net Worth?

• It is important to calculate your net worth as a means to measure your financial well-being and to become more financially aware. Your net worth is essentially the total value of your assets minus your liabilities. If the answer is a negative number, then you owe more than you have, which is best to figure out early so you can work to eliminate debt and increase your assets through such things as money making investments. According to the CNNMoney website, about half of U.S. households have a net worth of $100,000 or less. If your net worth is above that number, then you are already better off than most of the country. The higher your net worth, the more financially secure you are in your life. As long as you continue to increase that value as you age, you should be able to enjoy retirement without worrying about money.