Are You Financially Healthy?
Author: Deb / Date: August 7, 2023 / Tags: debt
(MoneyHippo.com) – No matter how much income you have, the best way to maintain a firm financial footing or grow wealth is to assess where you stand today. In fact, financial health is nearly as important as physical and mental help because all other areas of life become more difficult without it. With just a few simple steps, anyone can and should look at their financial picture to maintain or improve their finances.
The first thing to do is determine your net worth by writing down the value of all the assets you own, like a house, car, or stocks and subtracting any debts you carry, such as credit cards or mortgages.
Next, calculate your current debt to income ratio by adding up all debts and dividing that number by your income before taxes. Multiplying that result by 100 will give you a percentage that tells you how comparatively heavy or light your obligations are to your income. The lower the percentage, the better.
Here’s the formula:
Total Debt / Gross Income X 100 = Debt to Income Ratio
The good news is that once you have these two numbers, you can make a plan to adjust them to your liking over time. For example, if you find your net worth isn’t where you want it to be, consider acquiring more appreciable assets and lowering any outstanding debts. Similarly, if you think the debt ratio you calculated is too high, adjust your budget to pay down any obligations or increase your income to lower it.
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