Managing your income is a foundational step to achieving your financial goals. Considering your income and liabilities is a start, but there are other steps that should be taken to properly manage your finances and reach your personal goals.
First, it is important to know your net income (income minus taxes), which is what you take home from each paycheck. If you don’t know this already, you should formulate a budget . This can allow you to get a more accurate profile of what may or may not be realistic for the next step—goals. Everyone has more than one goal, so organizing and understanding them clearly will help guide your financial plan. The complicating factors, however, are liabilities, also known as expenses. Everyone also has liabilities that they are required to pay, including taxes, bills, food costs, emergency situations, and many more. These include but are not limited to family, property, and entertainment. No two people or family has the same income or expenses in tandem, so this must be calculated for yourself. What is universal, whoever, is managing these expenses by being more conservative with discretionary spending.
If you have more money going out than coming in, it’s time to diversify your income sources. You should be incorporating future income growth into your plan based on your career path and location of work. This might not be easy since everything is primarily a projection. However, outside of your job, there are ways to earn additional income through secondary jobs, passion projects, and creative methods of passive income. Regardless of where you plan to get this extra cash inflow, it is important to be realistic, but is just as important to work towards bigger goals.
It isn’t always easy to assess your own financial situation, and doing it accurately is far a complicated with generic advice. If you’d like a second-look or advice regarding your goals and financial plan, feel free to connect with us and we can discuss your personal situation.
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