The first step to getting control of your finances is to understand them. You may have an idea of how much you’ve saved and who you owe money to, but to get the full picture you need to dig a little deeper.
Here is how to get started in four easy steps.
Step 1: Categorise your finances into assets and liabilities
An asset is something of value that can be converted into cash (including cash). A liability is a debt or obligation that you’re servicing (child support or a student loan are examples).
Step 2: Work out the value of your assets
Put a dollar amount next to the following assets:
- Investments (e.g. shares)
Step 3: Work out the value of your liabilities
Put a dollar amount next to the following liabilities:
- Home loan / mortgage
- Balance owing on a credit card
- Balance owing on a personal loan or overdraft
- Any study/student loans.
Step 4: Subtract your total liabilities from your total assets
Once you have a total amount for each, subtract one from the other. This will show your approximate net worth.
In Portfolio view in NetBank and the CommBank app you can put in all your assets and liabilities so that you’re able to get a better view of your net worth whenever you need.
Next up: How to understand your spending