Evaluating Your 2018 Financial Plans
With 2018 coming to an end in a few days, it is time for your yearly resolutions. The New Year is generally the time to think about your past and reflect on how you can improve your upcoming year
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Right from your fitness resolutions to travel plans, the list is endless. But where does our financial resolutions or plans made at the beginning of the year go? Here are a few ways that can help you evaluate your 2018 financial plans:
Evaluate your net worth
The first step when evaluating your 2018 financial plans is by determining your net worth. Although this might sound difficult to calculate, your net worth is a measure that assesses your financial standing.
You can calculate your net worth by simply deducting your liabilities or debt from your asset value. Your assets generally include cash, investments, home, etc. and does not include your income. For instance, if you have a house that has a net value of ₹40 lakhs and you owe ₹25 lakhs as part of your home loan, your net value, in this case, would be ₹15 lakhs.
Determine your Debt to Income Ratio
The debt-to-income ratio(DTR) is another important factor that needs to be considered when evaluating your financial plans. The DTR also plays an equally important role in determining your creditworthiness.
The DTR is calculated by dividing your debts by your monthly income. If your DTR is more than 40 percent, you can consider a balance transfer to get it under control.
Find out where your money went
It is very important to be connected with your money. One of the best ways of doing it is by knowing where you are spending every rupee. Track where your money went and have a clear understanding of where your money went.
The best way of doing this by importing your bank transactions of the last six months and categorizing them to see your spending trends and patterns. This way you would know where and how much you need to control.
How well is your investment strategy aligned with your financial goals?
If you haven’t started investing, do it right away! Having an investment strategy is important but whether or not it is aligned with your financial goals is more important. For instance, if you are planning your retirement early, have you started investing or how risk-averse you are when it comes to your retirement funds?
The above steps will give you a pulse-check on your financial health and give you a baseline on where you are and how well you are performing financially. However, this is not the end to anything and should not stop you from your future financial plans. As everyone says, the sooner you can start, the better it is!
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