Is My Financial Situation Really That Bad?

24.10.2009 | Author: Edwood Woodward | Posted in Finance

We are part of a very fast changing world and this is making it very difficult to keep a record of all our expenses. Most of the people have no clue how to save money with the ever increasing expenses and the remaining do not know what to do with the money they save. Everything you do is going to cost you in some way.

You need to prepare yourself when you have the chance, or the day might come when you are stuck in a bad situation and wonder how nice it would have been if you had maintained a savings account. The first thing you need to do in order to estimate your financial situation is to keep in your mind that you have zero worth and everything you have is your asset.

You want to know where you stand financially and for this, you have to add up the financial worth of your assets and subtract all your expenses from this number. Your assets constitute anything that you have and can be sold for money; some common examples are your house, your car, your salary and a trust fund.

After calculating your total assets, you need to find out your total expenses. Expenses are the things that you need to pay for; they include utility bills, school fee for children, medical expenses, shopping expenses, and the list just goes on and on.

An ideal situation is when the amount of assets you have, exceeds your total expenses. But, if you end up getting a huge amount for your expenses that is far more than the assets you have, there is a high chance that you have missed some major items on your asset list. Good example could be the car you have had for the last 10 years, or the gifs you got from your parents on last Christmas.

It takes a long while to note all your expenses for the first time and the best way to do it is to maintain financial books and update them regularly. Doing this will help you know how you spend your income and what are the biggest expenses you pay for. Most of the time, people are spending more than they are earning. The gap between the income and expenses in these cases is mostly covered by loans. This is a very dangerous thing to do. Taking a loan means that, instead of saving, you are about to spend something that is not yours and cannot be covered through your income. The only way to fix this kind of situation is to try and reduce your daily expenses, and save money which can be used to pay back the loans. There is a very high chance that you will start cut backs and go a bit overboard, get frustrated by the resulting situation and give up on the whole idea. The best solution in these circumstances is to start budgeting. The plan is to commit yourself to a fixed amount to spend every day, month or year, depending upon the nature of the budget. Monthly budgets are the most effective way to get out of bad financial situations.

Budgets allow you to start saving, by recognizing your expenses and putting a stop to the unnecessary ones. By following these steps, you can manage your money in a much better way.

Edwood Woodward is a financial expert. You may contact with him to get debt consolidation services and get his opinions to make financial decisions of your life at http://www.moneysolve.co.uk.

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