Begins with the first step.
To know where you want to be, you must first know where you are. Creating a better future is hard work. To keep your spirits up, it will help to know where you started and be able to track how far you’ve come.
3 Steps to Know Your Savable (Disposable) Income
1. Stop crying every time you do your taxes.
Well, that is, if you’re like me and you cry every time you do your taxes. Not because of how much you have to pay-in, but because you realize that you’ve paid enough interest for the year to buy a [new roof, or a storage building, or a freaking boat]. Worse even still, you’ve paid enough in interest to pay off your credit card debt. We’re not the only ones – in 2015, the average household with debt owed more than $130,000, paying an average of $6,600 in interest for the year – approximately 9% of the average annual income. [Mathematical?] that’s over $30,000 in 5 years! You should be assessing this amount monthly, and estimating the totals for the year – the key here is to know whats coming, how to reduce the amount paid in, and how to prepare for it.
https://www.nerdwallet.com/blog/average-credit-card-debt-household/
2. Know your net worth.
This absolutely blew my mind. Net worth is a term you hear about occasionally, but I never thought of applying the metric to myself. It’s actually a pretty easy calculation, and it will give you a very clear indication of where you stand financially (which will help keep things in perspective when you’re making your plan to improve).
Use this handy calculator: http://www.investopedia.com/net-worth/demo/
The average net worth, in 2016, for the following ages were as follows:
25-34 = $9,000
35-44 = $52,000
45-54 = $100,000
55-64 = $180,000
65+ = $232,000+
Where do you stand?
http://www.financialsamurai.com/the-average-net-worth-for-the-above-average-person/
And, not to be a Debby Downer, but this is something to keep in mind. The dark forces of rampant consumerism are arrayed against us, waiting to pounce with…
Bankruptcy: In 2016 over 296,000 Individuals (State & District); plus over 474,000 Businesses = 770,000 Total Bankruptcy Cases. http://www.abi.org/newsroom/bankruptcy-statistics)
3. Make it a game.
Quick thought experiment. Imagine you have a chicken bacon salad. I know, rabbit food, bear with me. If you’re like me, you love salads, but only if they have lots of unsalad-y things in them. It’s a game of find-the-good-stuff-in-the-lettuce. Finding areas to save money can be similar. You’re looking to lower your income/spending ratio. Find the morsels of savings among the obligations (lettuce).
Average spending was approximately 99% Income (after taxes) in 2015. That is completely unsustainable, and leads to a reliance on credit.
What was your average last year? See here to improve.
https://www.bls.gov/news.release/cesan.nr0.htm; https://www.irs.com/articles/2015-federal-tax-rates-personal-exemptions-and-standard-deductions
