There are a lot of numbers in finances, so it’s understandable that some of us get confused from time to time. That said, there are some numbers that are essential when it comes to understanding our overall financial health. To help you get a better handle on the state of your finances, here are the five numbers you should know.
1. How Much Money You Have Coming In
This might seem like a no-brainer, but you would be surprised how many people don’t know how much money they bring home every month. Most folks might be able to rattle off their salary pretty easily, but their net and gross income don’t come to mind as quickly.
Having an accurate count of how much money you bring in every paycheck is vital to building and maintaining a good budget. So if you find yourself struggling to recall your income, you may want to consider taking a closer look at your next pay stub. There you’ll be able to see how much you make (before and after taxes) and how much you may be contributing towards a pension or retirement account.
2. How Much Money You Have Going Out
Knowing your expenses is vital when trying to maintain financial wellness. If you’re unsure how much you money you spend each month, consider tracking your purchasesfor four weeks. Not only will this let you discover how much money is leaving your wallet, but it will also let you see where it’s going. This could help you determine whether you’re overspending in certain areas of your life, find new ways to save and better optimize your budget to achieve your goals.
3. How Much Money You Owe
Your debt-to-income ratio is a great way to understand how much debt you’ve taken on and whether or not it’s in a manageable state. If you’re unsure of your debt-to-income ration, you can start by pulling up your most recent credit report, ideally one from all three bureaus, just in case there’s a minor discrepancy. (You can get your free annual credit reports from AnnualCreditReport.com and you can view your free credit scores each month on Credit.com.)
From there, you can tally up your monthly debt payments and divide that by your monthly income (gross; before taxes and other deductions). The lower the number, the better off you are. (For best credit scoring results, you generally want to keep the amount of debt you owe below at least 30% and ideally 10% of you available credit.)
4. Your Net Worth
Your net worth is essentially the difference between how much you own and how much you owe. What you own includes your bank accounts, investments and property like houses and cars. What you owe is essentially the sum total of all your debts. Your net worth can provide you with a general overview of your financial situation. If your number is positive, you’re in good shape! If your number is negative, it might be time to take a look at your finances and see if there’s a problem you need to fix.
5. How Much You Have Saved
Do you know how close you are to saving up for your current financial goal? Tracking your savings is a great way to make sure you continually contribute and can even help motivate you when times get tough! If you’re unsure how much you have saved for retirement, an emergency fund, or any other savings goal, you can consider constructing some sort of visual to help you keep track.
While it can be challenging to keep track of your finances, you’ll be better of in the long run for putting in the time and effort. Providing you’re able to stay on top of these five numbers, you should be in solid financial shape.
This article originally appeared on Credit.com and was written by Leslie Tayne.