I love the spirit of the day “Ask a stupid question” because when it comes to money, there are no stupid questions.
We all have them, but money is sometimes difficult.
In all honesty, you could save thousands of dollars (and lots heartache) by asking questions about the money you have instead of guessing and hoping your gambling will work out for the better.
What is net worth and how to calculate your net worth?
You’ve probably heard the term net worth, but what is it?
Basically, your net worth is the sum of your assets minus any accounting liabilities.
It is recommended that you regularly monitor your own capital. Overall, your net worth is an excellent indicator of your overall financial health. If you have positive net worth, you are doing something right. If you have negative net worth, you may need to change your personal financial habits.
It is important to note that your net worth is independent of your income. Instead, your net worth is a reflection of the assets you have accumulated or the debt you have accumulated over time.
For example: take a look at Kim Kardashian’s net worth who is like from April 2021, is an 1 billion dollars… Some of her assets include her Skims and KKW Beauty companies, her real estate and equity portfolio.
As far as we know, the Kardashians have no outstanding obligations.
The sum of its assets less the absence of outstanding liabilities gives the net worth 1 billion dollars…
How much money can I afford to spend?
We’ve all been to this – a special object catches the eye, or the charm of a gourmet meal calls you by name.
Is it a good idea to show off?
You probably shouldn’t spend money on every item you come across. But if you set a budget, you may find there is plenty of room to spend a little here and there.
A good rule of thumb for budgeting, especially if you’re new to budgeting, is a 50-30-20 budget.
The 50-30-20 budget is shaking to:
- 50% your income is spent on basic necessities.
- twenty% your income is saved.
- thirty% from your income can be spent on fun things – for example, show off here and there.
Of course, a 50-30-20 budget is just a starting point. If you have high debt burdens or ambitious financial goals, then you may decide to spend less money and save more.
What is an emergency fund and why is it needed So important?
An emergency fund is an important part of any healthy financial picture.
In fact, The Emergency Fund is a savings account that acts as a hedge against whatever life throws in your way.… If you have a large unexpected car repair that needs funding, or a drop in your income due to a job loss, you will be provided with an emergency fund to cover the costs. When you live your entire life with this financial safety net, you are likely to face less financial stress along the way.
However, emergency funds are not suitable for everyone. Instead, most financial experts recommend your emergency fund should be able to cover three to six months.
However, the size of your emergency fund will depend on your monthly expenses.
For example: if you spend $ 2,500 a month your emergency fund should be around $ 7,500.
But why is it important to have these tools at hand?
Life is good about getting rid of unexpected expenses at the most inopportune moment. Once you have a reserve fund, you can just pay for what you need and move on.
How can I manage my debt?
Any kind of debt can quickly turn into a financial burden that prevents you from living and spending the way you want. After all, huge minimum monthly payments can quickly rip out a chunk of your budget.
If you are serious about creating a bright financial future, then at some point you will have to pay off bad debts. ‘
Bad debt often carries high interest rates that prevent you from moving forward. For example, credit cards are notorious for having double-digit interest rates, which can make it difficult to pay off debts.
Take time to calculate all of your outstanding debts. When you have written down all the numbers, think about the options that are in front of you. In some cases, you may decide that you are comfortable with the size and type of your debt. For example, you might have a low-interest mortgage with a reasonable monthly payment that you can keep for now.
How can I improve my credit rating?
A credit score is a three-digit number that can have a big impact on your financial future. With a good credit rating, you can get access to the best loan terms for high-value items. Even slightly better conditions can save you thousands over the course of the loan.
That being said, it is understandable that one might wonder if one can raise one’s credit rating. The good news is that this absolutely possible!
Here are the two best ways to improve your performance:
- Start making your monthly payments on time. Because you make timely payments, your creditors will communicate your reliability to the credit bureau, which in turn will increase your score. After all, your credit rating is simply a measure of your reliability when it comes to paying off your obligations.
- Pay off your debt. By paying off your existing debt, you lower your debt-to-income ratio. A low debt-to-income ratio indicates to lenders that you are managing your loan responsibly. If you can manage to lower your debt-to-income ratio, this should lead to an increase in your ranking over time.
What is compound interest?
If you’ve been in the personal finance community for a while, you’ve probably heard the term compound interest.
But what is it?
Compound interest is the interest on the principal balance that is based on both the original principal and the accumulated interest. This means that it rewards those who start saving and investing early.
For example: Let’s say you deposit $ 100 into an account that pays 10% per annum. In the first year, you will earn $ 10 in interest. In the second year, your interest payment will be based on $ 110, not $ 100.With this, you will earn $ 11 in interest in the second year. Over time, the amount you earn as interest will continue to grow.
This concept will help you grow your investment as long as since you have a fairly large time horizon…
Should I insure my life?
Life insurance can be Other expenses that you don’t want to add to your budget. However, life insurance can be key to your family’s financial stability.
In most cases, you should definitely consider life insurance if you have dependents. The exception to this general rule is when you have already accumulated all the financial assets that you would like to leave for your family in the worst case.
Of course, no one likes to think about the possibility of death, but thinking about what could happen to those you leave without adequate financial resources can be an even more painful thought. That being said, it’s a good idea to find out how much life insurance you want to keep for your family and find the right policy.
If you don’t have dependents, then you probably don’t need life insurance at all.
I amif you are human without a spouse or child relying on your income most likely does not need life insurance. But you should completely rethink your life insurance needs if your situation changes.
Credit Card Rewards Indeed worth it?
Have you ever looked at a credit card offer and thought – wow, this looks good, but what’s the catch? After all, why might a credit card company offer you hundreds of dollars in reward just to sign up and spend on your card.
The credit card company hopes that you will not always pay your entire balance every month and pay them interest as you go.
However, you should always make payments in full in a timely manner every month. This will deprive the credit card company of any interest payments, but you will still receive the promised reward!
As long as you make these monthly payments on time, the credit card reward absolutely worth it.
Is it really possible to retire early?
You’ve probably seen a title that goes something like this:
“A 30-year-old guy quits his hated job and drives off to meet the sunset.”
If you’re even a little like me, a headline like this might make you scratch your head.
At the first meeting with FIRE – Early retirement for financial independence – movementI was skeptical. I’ve never met someone who retired early so I didn’t think it could Indeed happen.
But after some research, I found that many people prefer to strive for financial independence and leave their jobs forever.
With this, yes, it is really possible to retire early. However, you will have to start saving VERY early. to achieve such a big goal.
Summary
The foundation of your financial future will depend on the right questions about your personal finances.
Personally, I don’t think there are any stupid questions when it comes to money. It is much better to ask this now than to regret decisions based on guesswork later.
So, when you are building your financial foundation, never be afraid to ask questions, no matter how large or small.