If you have not done this before, just try to calculate out what is your net worth (your personal assets - debts) and your monthly cash flow ( Income - expenses ).
After completed the above 2 statement, you will at least have some idea on 'how much you have' and 'how your monthly income being used every month' on this simple calculation.
You are able to monitor your 'financial health' monthly by doing this calculation and to see whether your finance are improving or worsen each month.
Please note that if :-
The net worth is negative (Meaning your debts are higher that assets and you are rely on borrowing to live) or
The cash flow statement is negative ( Meaning your expenses is higher than income, your personal wealth is being eroded every month if no action to be taken to ractify it )
The interest expenses is high in proportionate to your income ( Meaning large portion of your income is being PAID to finance company, you are actually working for the finance company rather than for yourself )
RED is alarming, urgent actions need to be done to ractify it !
Attached above a sample of 'Personal Net Worth Statement' and 'Personal Cash Flow Statement' to help you to compute your own financial statement.
1 comment:
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