Personal Finance Basics - The 2 Most Important Numbers You Need To Know To Become Wealthy
How do you gauge if you happen to be on the right track in financial terms
? Are there methods you employ? Or do you just take a look at whether or not you're making more than previous years? Personal finance basics might imply that simply earning more isn't an accurate measure of financial progress. There are essentially two numbers that you have to know at all times in order to track your financial development. They're not just important to know, but also imperative for financial success.
The two numbers you will need to know to become financially successful are:
Your cash flow - Are you spending more than you make?
Your net worth - Are you going in the right direction?
Lets us take a look at these two in a bit more detail.
Your cash flow: The difference between how much you get and how much you keep is recognized as cash flow. In a literal sense, it's the flow of cash. They say cash is king, but I'd say that cash flow is really king. You see it's not what amount you make, alternatively its the amount you keep. Try to remember, broke is broke. Making $50, 000 /year and spending $70, 000/year isn't any different than making $20, 000/year and spending $40, 000/year. If you don't learn personal finance basics then you are going to have difficulty to manage your cash flow.
Your net worth: The straight forward definition of a net worth is your assets (whatever you own) minus your liabilities (what you owe). Think of it as a financial compass. There are loads of free net worth calculators available on the Internet for free. We also provide a not cost financial calculator if you click the link below. If your net worth is regularly increasing then you can assume you are on the appropriate financial path.
If you keep these numbers on hand and revise them on a regular basis then you will guarantee proper tracking of your financial progress. I personally use these numbers to keep track of my progress on a regular basis. This is all part of personal finance basics.