Take inventory of your finances to make progress this year

Now you are in the New Year, a time you need to make new resolutions that will impact positively in your personal and family finances.

But before that resolution, it is imperative to take inventory of your finances to enable you make the desired changes.

Personal finance experts believe that you need to assess where you are and what you need to change for the year.

Miriam Caldwell, personal finance specialists, said you need to figure out where you are and what you need to do to help your situation match your goals.

Totalling your debt is important. They said you should begin by listing your debts. Make a column for the amount you owe, a column for the interest you are paying on the debt, and a column for the monthly payment. Then total the amount you owe. Additionally, you should total the amount you pay on debt payments each month. It is up to you whether or not you include your house payment, but if you have a second mortgage or a home equity loan it should be included on this debt list.

Secondly, you need to list your assets. Your assets are things that you currently have that are worth something. Do not include your retirement savings in this list, because we will cover it later. A car is a depreciating asset and you can only include it if you have paid it off completely. Other assets may be stocks that you own, money in savings, your home (if you have any equity) and any other valuables that you are willing to sell if you need to.

The next thing is to figure out your net worth. This is the opportunity for you to see what your net worth is. Your net worth is the total of your debts subtracted from your assets. It is possible to have a negative net worth. This means that you owe more money that you have. It is important to check in on this number occasionally. When you retirement you want your net worth to be a positive number with a lot of money in savings and investments.

Next you should figure out your debt-to-income ratio. This lets you know the percentage of your income goes to debt payments each month. If you have a debt income ratio higher than 30 percent you need to start making changes now. If it is higher than 40 percent you may have trouble paying your bills soon. You should include your mortgage payment in this calculation. Simply divide the total amount you pay in debt each month by your monthly salary. The resulting number is your debt-to-income ratio.

Your retirement is another important aspect of your finances. Many people in their twenties put off paying for retirement because it is so far away. However the sooner you begin seriously saving for retirement the better off you will be. In fact you can really use the power of interest if you begin saving now.

List how much you contribute each month to retirement savings, the amount that your employer is willing to match and how much you currently have in retirement savings. If you still have debt, you should cut your retirement contributions back to your employer’s match and then focus on getting out of debt. If you are debt free, work on getting your retirement contributions up to 15 percent.

HOPE MOSES-ASHIKE