Top 4 Things Everyone Should Know About Their Finances

November 22, 2009 – 2:10 am

I listen to one hour of the Dave Ramsey show each day I workout, and it drives me crazy how many people that call in who are overwhelmed and yet don’t even know the most common values. I do know what it feels like to be in debt and behind on bills, but I still find it hard to believe that people don’t even know how much they earn.

Below is a list of the four key things everyone should know at all times:

  1. Monthly (or annual) income. Ideally you should know both your gross and net income, but in a pinch your net income (i.e your take-home pay) is the most valuable of these two choices.
  2. Total Debt Outstanding
  3. Average Fixed expenses (rent or mortgage, minimum debt payments, insurance, utilities, etc).
  4. Expected savings or spending overage.

If you think about it, this is essentially a very basic budget.

Gross Income

-Taxes

=Net Income

-Debt Payments

-fixed payments

-savings (hopefully)

=0

Budgeting doesn’t have to be complicated, although I am an advocate of keeping a detailed budget if you truly want to make quick progress towards your financial goals. I’ll be expanding on the topic of budgeting in future posts, including how my wife and I budget and some of the benefits to keeping a detailed budget.

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