To many people, financial independence is among the short-and-long financial goals. By being financially independent, people can arguably live, at the very least, a little happier in life (though money is not the only and direct source of happiness).
Unlike most people’s perception, financial independence does not translate to being able to afford anything one’s want in life. It actually refers to the financial balance that leads to sustainable financial health.
To achieve that state, there are various paths that one can pursue. However, indifferent from other things, it begins with one single step. No, it is not saving.
Prior to saving, there’s one little step that becomes the foundation of a good financial life. To begin pursuing financial independence, one should understand the personal net worth.
Though it sounds like a taxing concept, net worth is actually quite simple. To know about your personal net worth and how to proceed with your pursuit towards financial independence, here are short tips you can follow.
Also Read: What is a Good Financial Decision?
Financial Independence: Knowing Your Net Worth
To figure out your net worth, you do not have to be a financial expert. You simply need to calculate all your financial assets minus your financial liabilities.
Financial assets include all the material possessions you have. For instance, house, cars, laptops, saving accounts, and investment accounts belong to financial assets.
Financial liabilities, on the other hand, refer to any short and long term financial burdens you have to pay off. It can be loans, debts, credit card balance, and so forth.
After subtracting them, you need to look into the difference. If, according to you, the difference is high enough, then you will most likely be fine.
Right after taking your ‘first step,’ you need to create a budget. In short, what you need to write down are your monthly incomes as well as essential and non-essential expenses. See whether your income is enough to cover both expenses.
Also Read: How to Create Good Financial Habits
