When it comes to your finances, there are six financial numbers you should know. In the article below we take a look at each of these numbers, explaining why they’re important and how you can find out yours.
We know that it might be a little daunting getting to know these numbers, especially if it’s the first time you’ve really paid attention to them, but trust us when we tell you they shouldn’t be ignored.
Keep track of these numbers on a monthly basis and use them to make a plan for your money. Knowing them will help reduce any costly surprises. They’ll help you stay in control of your finances. And they’ll help you set accurate and achievable financial goals.
1. After-Tax Income
One of the most important financial numbers to know is your after-tax income. This is the amount of money from your salary that you actually get to keep each month.
Understanding how much money you have coming in every month is key to good money management. After all, how do you know how much money you can spend if you don’t know how much money you have?
You can look at a previous payslip, or a recent bank statement to see how much money you’re taking home each month. If you have a money management app like Emma you can use the search feature to find out how much you were paid last month.
If you’re not paid the same amount each month you can view the “Income” category instead. This view will show you how much money you’ve received in income for multiple months – simply use an average across the last 3 months to work out your rough after-tax income.
2. Your Monthly Expenses
After finding out your after-tax income you should then work out your monthly expenses. Monthly expenses could include gas and electricity bills, rent or mortgage payments, even subscriptions to services such as Netflix, Amazon, and Spotify.
Understanding how much money has to come out of your account each month will help you identify two things. One, if you earn enough money to cover all your expenses. And two, if you have any money left after you’ve paid your bills.
To work out the total cost of your monthly expenses, start by adding up the cost of your most important fixed expenses, like bills and subscriptions. Then think about your other monthly priorities, like travel charges, grocery shops, entertainment costs, etc.
Noting all these figures down is the starting point of creating a budget. You know how much money is coming in. How much money is going out. And you’ll be able to identify any areas that you can reduce or increase your spending.
3. Your Total Debt
Another personal finance number that’s good to know is your total debt. This is the total amount of money you owe on one loan, or if you have more than one loan, the total of each loan added together.
knowing the total amount you owe can help give you focus when it comes to setting a repayment plan, i.e. identifying how long you think it’ll take for you to become debt-free.
Understanding how much you owe on each individual loan is just as important. Knowing the total of each debt helps you make the right decisions about which loan is best to target first with extra repayments. Doing this might help you spot a smaller loan that can be paid off straight away. Or it might highlight that you need to concentrate extra repayments on a, particularly large loan.
Money management apps like Emma can help you keep track of each of your loans. As well as adding your everyday current accounts, you can also add each of your loans to Emma. We’ll track your spending and send you daily balance notifications so you can easily keep on top of all your finances.
4. Your Net Worth
Net Worth is a single number you can use to determine your current financial position. The number can be positive or negative and when tracked over time can help determine your financial progress. See your Net Worth increase over time and you know you’re managing your finances well. See your Net Worth fall and you might need to pay closer attention to your money.
To calculate your Net Worth add up the value of all your assets, then minus the value of your liabilities. Assets are things of value that you own, so add up how much you have in your bank, investment, and retirement accounts, as well as anything expensive you own like your house, car, art, or jewelry. Liabilities are then everything you owe. This could include your mortgage, student loans, credit card, and loan debts.
You can even use money management apps like Emma to calculate your Net Worth for you. Connect your current accounts, credit cards, investments, and loans, and we’ll do the hard work for you. With our premium subscription service, Emma Pro, you can even go one step further to manually add in other assets like property and cars.
5. Your Credit Score
Your credit score is a number used by lenders to determine your creditworthiness. The score is based on information from your credit report and any other information you share with a lender.
The higher your credit score, the more trustworthy you seem to lenders. There are lots of benefits to this.
A good credit score can help you get the best interest rates when applying for a mortgage or a car loan. Even a small reduction in interest rates can save you thousands of pounds/ dollars over the course of a loan.
People with a higher credit score will also have access to more financial products and services. This means you’ll be able to shop around for the best deals and rates. For example, a high credit score will give you access to the best credit cards on the market – the ones with the lowest interest, and the best rewards.
Credit bureaus like Experian, TransUnion, and Equifax store your credit history and firms like FICO then use this to work out your credit score. If you think a credit score is something you’d like to see in Emma, then drop us a message on Twitter or on the Emma Community.
6. Your Interest Rates
Interest rates are last on our list of financial numbers you should know. It’s a good idea to know what the interest rates are for any credit cards, savings accounts, and mortgages that you have.
For credit cards, it’s good to know the interest rate for each card so you can sort them from the highest interest rate to the lowest. You should always make the minimum repayments on your credit cards, but understanding which cards have the highest interest rate can then help you determine which credit cards would benefit from extra payments.
If you have an adjustable-rate mortgage, then the interest rate will change after the initial set period of two, three, five years, etc. It’s important that you know whether the interest rate on your mortgage is going to increase, as it’ll mean your monthly repayments are larger. Understanding your interest rates here means you can assess whether it’s worth refinancing to another mortgage with better interest rates.
And lastly, understanding the interest rates on your savings account is also important. The better the interest rate, the more money your savings will make you.
These six financial numbers will help you know exactly where you stand financially. Keeping track of these financial numbers is the best way to track your progress and reach new financial goals.
For more help managing your finances, download a budgeting and money management app like Emma. You can connect all your accounts, investments, and loans so you have one view of your finances. You can also track your spending, set budgets, spot any unwanted subscriptions, and save money. Available for download on IOS and Android.