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A thread on how to manage your personal finances.
1. Create a balance sheet. A balance sheet is a summary of an individuals or organization financial position at a point in time. (write down the date)
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1. Create a balance sheet. A balance sheet is a summary of an individuals or organization financial position at a point in time. (write down the date)
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Include all assets and liabilities at said date.
An asset is anything you own that has value to the general public. (i.e. stocks, a home, rare trading card, etc.)
A liability is a current obligation that requires you make a future payment. (i.e. debt, tax payable, etc.)
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An asset is anything you own that has value to the general public. (i.e. stocks, a home, rare trading card, etc.)
A liability is a current obligation that requires you make a future payment. (i.e. debt, tax payable, etc.)
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2. Create a budget. Include all sources of income and all expenses.
We prefer to have create a 5 year budget, with a monthly break-down for the next 12 months and yearly breakdown for Y2-Y5.
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We prefer to have create a 5 year budget, with a monthly break-down for the next 12 months and yearly breakdown for Y2-Y5.
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3. Create an emergency fund. The rule of thumb is to be able to survive 3 months without any income.
Everyone's situation is different so be mindful.
If you're young, you probably don't need a large fund. However, if you have a family - you probably need a decent amount.
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Everyone's situation is different so be mindful.
If you're young, you probably don't need a large fund. However, if you have a family - you probably need a decent amount.
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4. Determine your financial goals.
For example if you want to buy a house and it cost $500,000. You'll need to save $100,000 for a down payment.
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For example if you want to buy a house and it cost $500,000. You'll need to save $100,000 for a down payment.
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5. Determine how you will achieve your financial goal.
I will save and invest $25,000 over the next 3 years to accumulate a $100,000 for the down payment.
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I will save and invest $25,000 over the next 3 years to accumulate a $100,000 for the down payment.
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6. MEASURE YOUR PROGRESS! Remember the balance sheet and budget?
Update both of them on a yearly basis and determine how effective you were at implementing your strategy.
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Update both of them on a yearly basis and determine how effective you were at implementing your strategy.
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For example: If you made your balance sheet and budget at December 31, 2020. Check your balance sheet first at December 31, 2021 to see if you successfully saved $25,000.
Update your budget to ensure its realistic and see if there way to grow your income to cut down costs.
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Update your budget to ensure its realistic and see if there way to grow your income to cut down costs.
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Managing finances is fairly simple. Every public company uses a balance sheet and income statement (budget). So should you!
All it requires is a little bit of effort, consistency and patience.
Please follow @mgroupinvests if you enjoyed this thread!
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All it requires is a little bit of effort, consistency and patience.
Please follow @mgroupinvests if you enjoyed this thread!
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Please feel free to reach out with any questions and request our sample balance sheet and budget template.
