Saving for the future can be a real challenge. It’s human nature to want to enjoy things now, so sacrificing today to put money aside for the years or even decades ahead is difficult for many.
As the saying goes, though, good things certainly come to those who wait. The sacrifices that you make now can have a profound impact on your future finances. In fact, you could easily have an extra half-million dollars for retirement, with only a little dedication and patience today.
How Much Could You Save in 30 Years?
Thanks to compound interest, the dollars you set aside today will continue to grow and grow over the years. The longer you let that money sit and compound, the larger your balance will grow.
Let’s say you decided to save $125 a week now (or $500 a month) in a high-yield savings account. You plan to contribute monthly, and don’t intend to touch that money for the next 30 years.
Over three decades, the actual contributions into your savings account would total an impressive $180,000. This number alone is nothing to scoff at, of course; with the power of compound interest, though, your balance could be expected to balloon by tens of thousands of dollars.
Of course, it’s impossible to know what interest rates will do in the years to come. We could see skyrocketing rates just as we could see APYs (annual percentage yield) plummet. However, let’s just see the math at today’s high-yield savings rates, for simplicity’s sake.
Image source: Investors.gov.
Using the calculator at Investor.gov, we can see that a $500 monthly contribution into a savings account earning 1.7% APY grows to $233,123.75 over time. That’s more than $53,000 in “free” money, thanks to compound interest.
Choose to put your savings in a certificate of deposit (CD) instead, and you may be able to earn even more. For instance, some CDs today offer around 2.2% APY. At that rate, your savings would grow to over $252,141 in 30 years, earning you an extra $72,141.72 on top of your monthly contributions.
With $500 monthly contributions
Earning an average of 1.2% APY
Earning an average of 1.7% APY
Earning an average of 2.2% APY
After 30 years
$180,000
$215,845.76
$233,123.75
$252,141.72
Growth
n/a
+$35,845.76
+$53,123.75
+$72,141.72
Where You Save Your Money Matters
As you can already see, it is important to put your money in an account that earns as much as possible, while also maintaining a risk level that keeps you comfortable. While a savings account or CD is a safe choice that still earns a modest return, you could earn even more by putting that extra $500 into a different savings vehicle.
Historically, 401(k) retirement savings accounts have an average rate of return somewhere in the 5-8% range. While your actual return is always contingent on market trends and the investments/risk tolerances you select, putting extra savings in your portfolio is a better way to earn even more than you would with a savings account.
“Between 1926 and 2018, the average annual return of the S&P 500 was about 10%. Adjust that 10% for inflation, and that brings you to an average annual, real return of 7%,” wrote The Motley Fool’s Catherine Brock.
Individual years may return more or less. Over decades, however, investing broadly in the stock market has actually been very predictable (though it’s always important to remember that past performance does not guarantee what happens in the future).
As an example, if you contribute $500 a month and earn an average return of 6.5% annually, your retirement account could easily grow to over $530,000 in 30 years. Even earning a below-average annual return of 4.5% would result in a balance of over $367,000, more than doubling your cash contributions in 30 years!
If you put your contributions in a…
Savings account earning 1.7% APY
CD earning 2.2% APY
401(K) with an average return of 4.5% annually
401(K) with an average return of 6% annually
Your balance after 30 years will be…
$233,123.75
$252,141.72
$375,404.70
$490,128.23
Of course, investments involve added risk and expenses, and returns aren’t guaranteed. However, you can easily see how much it matters when choosing where to put your savings.
If You Can’t Spare $500 a Month…
I understand setting aside $500 a month might be a stretch for some households. If that’s the case for you right now, don’t fret — you can still build an impressive nest egg by putting aside whatever you can.
For instance, let’s say you’re only able to save $100 a month. After 30 years, you will have contributed $36,000 out of your own pocket into savings, but thanks to compound interest, you may see a balance that’s much higher.
With $100 monthly contributions
Earning an average of 1.2% APY
Earning an average of 1.7% APY
Earning an average of 2.2% APY
After 30 years
$36,000
$43,169.15
$46,624.75
$50,428.34
Growth
n/a
+$7,169.15
+$10,624.75
+$14,428.34
Even earning a mere 1.2% APY with your savings account would earn you an extra $7,169. That’s money you didn’t work to earn, which can go toward your retirement expenses (or even a fun family vacation).
Save Now, Spend Later
The most important rule in saving is to set aside as much as you can as early as possible. Whether you’re able to put $500 a month into savings today or not, strive to put as much as possible into the account of your choosing.
Compound interest will work to grow your money over the years. The longer you save, the higher your savings will grow. And of course, as your career progresses and your financial situation changes, you can always increase those monthly contributions to earn even more.
With a little dedication (and some key discipline), today’s savings could easily be tomorrow’s comfortable nest egg.
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’Tis the season to think green! So let’s do as the leprechauns do and celebrate a goal shared by real and imaginary creatures alike: protecting one’s stash.
Whether you’ve got an overflowing pot of gold or a more modest balance sheet, here are four principles for protecting your wealth.
Insure Your Stash
The biggest threat to your wealth is unforeseen expenses, especially medical bills; home and car repair; liability; and lost income due to death or disability. Failing to carry insurance against catastrophic losses isn’t thrifty; it’s shortsighted. The good news is that more Americans have access to affordable medical insurance than ever before, and shopping for car and home insurance has gotten cheaper and more convenient thanks to online marketplaces.
Plan for Emergencies
Your emergency fund (aka auxiliary pot of gold) works along with insurance. The emergency fund protects you against small losses; insurance protects you against big ones. Personal finance experts will argue endlessly about how big your emergency fund should be ($1000? Three months of expenses? Six months?), but we all agree on this: any emergency fund is better than none. Keep it in an FDIC-insured savings account; an online account that pays a little interest is a good choice.
Invest Your Gold Wisely
Most of us will have to fund a substantial portion of our retirement from our own savings. That makes it critical to invest well. Luckily, this doesn’t require supernatural abilities. Choose low-cost funds (such as index funds), don’t take more risk than you can handle (always own both stocks and bonds), save aggressively, and don’t be impulsive. Make a plan and stick to it regardless of what your cousin warns you about on Facebook. Great investing may be boring: it means thinking long-term, using unexciting mutual funds, and not making any sudden moves.
Create Your Own Pot of Gold
When we’re trying to save more money, we obsess over restaurant meals, entertainment, and travel—that is, we start by trying to cut out the most enjoyable, stress-relieving parts of our lives, even though they probably add up to a small part of our monthly spending. Instead, consider what you could save on housing or transportation. Voluntarily downsizing or giving up one car in favor of public transit, cycling, or car sharing can save hundreds per month, and there’s no evidence that it will make you any less happy. (Unless you reduce your commute time or get some cardio in on the way to work, in which case it’ll make you more happy.)
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According to the National Highway Traffic Safety Administration (NHTSA) there were more than 5.6 million police-reported crashes in the U.S. in 2013. No doubt these crashes can take a huge emotional and financial toll on those impacted – and you might be surprised to learn what your policy covers, and doesn’t cover. The price tag for those crashes: $871 billion in economic loss and societal harm in 2010 also according to the NHSTA.
If you find yourself in an accident, it’s easy to feel frustrated, overwhelmed and scared. But there are a few things you can do to protect you and your money before and after an accident.
Prevention Before an Accident
Consider purchasing rental car coverage. This will pay for you to have a rental car for the time your car is in the shop being repaired. The coverage is inexpensive, but paying for a rental during a long repair can add up quickly.
Many car insurance policies offer coverage that you may not know about, so make sure your auto insurance policy is up-to-date and provides the right amount of coverage for you and your vehicle. Many minor details can make a huge difference when you need to file a claim after a collision.
Keep copies of your insurance policy and registration in your vehicle at all times.
Steps to Take After an Accident
Safety is paramount. Get you and all passengers to a safe spot and wait for help to arrive.
Get everything documented as quickly as possible and share information with the other driver including make, model and license plate. You’ll also want to get the other person’s contact and car insurance information so the claims process will go much more smoothly.
Take photos and gather witnesses. If you have a smartphone, it can be helpful to take photos of the damages, especially if you know you weren’t at fault and want to prove it. If you can find eyewitnesses and collect their contact information to give to the police and to your insurance company, that’s even better.
You may see a rate hike on your monthly insurance premiums if you are found to be at fault. Keep in mind if you have been accident free for a long time, many carriers will forgive your first at-fault accident.
If you are working with an independent agency like CoverHound, ask them to check all of their carrier partners for a better policy. Many carriers specialize in different risk profiles, so it’s possible another carrier they represent may have a better policy for you. Not all wrecks will result in a rate hike, but being proactive and working with your insurer is important after an accident. If you’re looking to get more from your provider, then you can switch insurers to take advantage of low rates.
This article was written and sponsored by CoverHound, where you can compare car insurance rates in as little as 3 minutes.
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After a brutal winter, many of us are ready to embrace spring with open arms! The arrival of spring also signals seasonal cleaning duties such as cleaning windows, putting away the winter wardrobe and breaking out the flip flops.
But don’t forget to include your personal finances in your spring cleaning “to do” list! Spring is the perfect time to tackle financial clutter–from refreshing budgets to going paperless to cleaning up your credit score.
Here are 5 tips that make it easy to do a financial clean sweep this spring:
1. Refresh your budget
Kick off your financial spring cleaning by refreshing your budget. Revisit the financial goals you set January 1. How are you doing so far? If you’re over budget, look at where you can make changes and cut back on spending. Remember to adjust your budget to satisfy current needs as well as long-term savings goals.
2. Reduce financial clutter – go paperless
You know that amazing feeling when you get rid of clothes you haven’t worn in years? Getting rid of that filing cabinet filled with old bills and credit card statements can feel just as freeing. A good way to cut down on clutter is to opt for electronic bill payments using a free bill-paying app like Mint Bills – which allows you to pay all your bills and schedule bill payments via an easy to use web and mobile platform.
3. Check your credit score
If you haven’t checked your credit score, now might be a great time. This number is a critical part of a consumer’s financial portfolio. Understand your score and the factors impacting it so you can learn how to improve it. If your credit score is low, commit to making your payments on time and focus on chipping away at large balances on your credit cards.
4. Pay off holiday debt once and for all
Cleaning up this debt quickly can put you in a much better financial position for the rest of the year. Start by clearing up your credit lines and pay off the purchases you made over the holiday season. If you have to, put yourself on a stricter debt payoff plan specifically focused on paying off the debt you accumulated over the holidays.
5. Sell unwanted items
Instead of throwing away your belongings to reduce clutter, consider selling your stuff to help boost your savings goals or earn extra money. Getting rid of old furniture? Try Craigslist. Cleaning out your closet? Try selling your clothing and accessories on Threadflip, a site that helps list, price, and ship the items for you.
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In case you missed it, last week we hosted a Twitter chat on the topic of #HowWeSpend, where we covered everything from the biggest spending trends of 2014, tips on spending wisely in 2015 to hot topics like mobile payments and millennial spending habits.
With over 128 Twitter chat contributors and 697 mentions of #HowWeSpend, the chat was packed with great content and tips from consumer financial experts, Mint partners and Minters alike.
Check out some of our favorite tips and chat highlights below, or to follow all that was shared during last week’s chat, just plug #HowWeSpend in the Twitter search bar.
Thanks again to all of you who followed along!
#HowWeSpend Twitter Chat Highlights:
Q: How do you expect spending trends to vary in 2015 vs. 2014?
I expect that there will be a rise in spending by the “IndieWoman”: 27 & older, lives alone & has no kids. – @TheBudgetnista
Many economists predict 2015 may be the year more millennials finally enter the housing market – @Glink
Low gas prices and a strong dollar will mean more travel spending. Budget travel tips: http://bit.ly/1EBacox – @hperez
Q: How are mobile payments changing #HowWeSpend?
Mobile is convenient 4 sure, but avoid impulse purchases and monitor spending. – @hperez
I pay every bill that comes in mail or email via my bank’s mobile app. Easy way to track spending. – @sharon_epperson
Pay all your bills (utility, cable, credit cards) w/the #MintBills app – it’s easier than ever to stay on top of it all – @mintbills
Q: Let’s talk millennials. How are they saving differently than their parents?
Studies show millennials less likely to have savings to cover unexpected expenses. – @CHLebedinsky
Mint survey found millennials focus on fulfilling immediate needs (like rent, student loans) more than future saving – @mint
Millennials are far more comfortable with using smartphones, apps and online tools to help spend & save – @TheBudgetnista
Q: Best tip on finding the right balance between spending vs. saving?
Think of life on both sides of the = sign. income should be >/= to expenses and if not, one side needs adjusting – @OysterRiverPart
It’s important to understand the difference between items you actually NEED & those you simply WANT – @EFXFinanceBlog
Spend, spend, spend will lead to poverty while save, save, save will lead to resentment. Be responsible but also have fun! – @Steve_Repak
Q: What’s your personal secret to financial success?
Automate savings and bill paying. Use app such as #Mint to track spending. Don’t try to keep up with Joneses – @CHLebedinsky
Make saving and budgeting into a social game and enjoy it! When your having fun you will always succeed. – @pennypinchbros
My secret to financial success: 1. (again, my) BUDGET –@TheBudgetnista
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April is Financial Literacy Month, making it a great time to boost your money knowledge and take charge of your financial life. To celebrate, we’ll be providing you tips, tricks and insights throughout the month to help you manage your financial health. Be sure to check back in on the blog and join the conversation on Twitter & Facebook – we’ll be surprising some lucky followers with prizes throughout the month, so chime in to win!
Did you know that only one third of American households have a budget? Well, they say a journey of a thousand miles begins with a single step, so what are you waiting for? Kick off Financial Literacy Month and get your financial life in order. Here are a few ideas to help you get there:
Update your budget
Analyze your spending patterns over the last few months. If you’ve gone a little overboard on entertainment or dining out, it’s a good time to revisit your budget and adjust for any changes. Make sure your budget matches your actual spending and perhaps take a minute to remind yourself of your financial goals that will help you better stick to your financial plan.
Check your credit score
Your credit score is three little numbers that can have a big impact on your financial life. Get your free credit score from Mint.com so you know where you stand and look at ways to improve your score.
Automate everything
Use Financial Literacy Month as a motivator to finally automate all of your bills and savings. The more you can automate, the easier managing your finances will be the rest of the year. Download a free bill payment app like Mint Bills that will help you pay your bills on time (and on-the-go) and maintain a healthy credit rating.
Develop a debt payoff strategy
Take the time to review your balances. If you have extra cash in the bank, you might want to make a large payment toward cutting down your debt. If you can’t pay down a debt you’ve accumulated so far this year, create a payoff plan that will get it down by this time next year. You can pay down your debt from smallest to largest, or pay down the debt with the highest interest rate first. Either way, Financial Literacy Month is a perfect time to develop a strategy to become debt-free.
So happy spring! There’s no better time than now to hit the financial refresh button and be good with your money. Just think how much you’ll enjoy your summer vacation with your budget on track.
Do you have a personal finance success story you want to share? Or perhaps there is a financial stumbling block you’ve encountered, and want to share how you overcame it? If so, leave a comment below to help inspire other MintLife readers.
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When it comes to your financial health, what you don’t know can cost you. Just like the annual physical with your doctor keeps your body’s health on track, knowing your financial vital signs can save you money and help you keep fiscally fit. Match your financial knowledge in the categories below to see where you can shape up!
Net Worth
Do you know what your net worth is? If the answer is no, you’re not alone: most Americans don’t! But knowing your net worth, the value of your assets (your savings and retirement accounts, your house, collectibles, your car) minus your total debts (including house payments and car payments) – is key to tracking your financial health. Knowing your net worth offers a clear picture of your financial state, showing you how you spend your money. Calculate your net worth regularly—ideally once a quarter—to identify areas where there’s room for improvement.
Mortgage Rate
According to a new Bankrate.com report, a whopping 35% of Americans don’t know their mortgage interest rate. How about you? Rates have bounced around historical lows for years, yet many homeowners who could benefit from refinancing haven’t taken advantage of the potential savings because they were unaware of their current rate. With rates expected to rise from 4.2% to over 5% in 2015, now is the time to do some easy research and stop leaving thousands of dollars on the table.
Credit Score
Your credit score – a three-digit number that represents your credit risk with a number that ranges from about 300 to 850 – is looked at by everyone from lenders to landlords. The National Foundation for Credit Counseling recently found that 60% of adults hadn’t reviewed their credit score within the previous 12 months. Big mistake, particularly if you’re in the market for a loan. Why is this number so important? Score high (mid 700s) and you could save thousands of dollars in low interest rates. Score low (below 620) and when you apply for a loan you’ll be offered a higher rate, favorable terms or even worse, you may not be able to obtain financing at all. Want to know where you stand? You can get your score for free from any number of providers including Mint.com. If your score is low, work on improving it by making your payments on time (try Mint Bills to get reminders when bills are due, stay organized, and pay on the spot). Also, cut back on using credit cards; a good rule of thumb is to avoid using more than 10% of your available credit on any card.
Make Friends with Your Credit Report
Your credit report contains detailed information about your credit history including things like credit-card use, auto loans and debts that were sent for collection. For such important information, an alarming number of credit reports contain mistakes. In fact, an FTC study indicates that as many as 40 million Americans have a mistake on their credit report. Since fewer than one-in-five consumers check their reports, chances are most people don’t know about the errors. Yet if a mistake is serious, it can lower your credit score and possibly result in your being denied credit. Get a free copy of your credit report on AnnualCreditReport.com and review it carefully.
–Vera Gibbons,Mint Contributor and Personal Finance expert
This post was corrected on March 6, 2015.
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Many Americans are living paycheck to paycheck and struggling to make ends meet. A paycheck has much more information than simply take home pay, and understanding your pay stub is the first step to good money management. Get familiar with what a pay stub means so you can take control of your finances.
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Inside: Did you know that you can get cash back when paying with Apple Pay? If not, there are plenty of rewards and perks to be had.
Apple Pay is the newest way to make payments. It’s the easiest, most secure way for you to pay with your iPhone or iPad anywhere credit and debit cards are accepted.
But how does it work? And what can you get back if you use Apple Pay?
Here is everything that we know about using Apple Pay:
Apple Pay is a digital wallet that allows you to pay with your phone for purchases.
It’s an easy way to spend less, save more, and shop responsibly.
In fact, new trends show that 82% of Americans use digital payment methods; a significant increase over previous years (source).
But what if I told you there was a hidden perk of Apple Pay? You can get cash back on every purchase!
What is Apple Pay?
Apple Pay is a digital payment system that was introduced by Apple in 2014. With the mobile wallet, Apple Pay allows users to make payments with their iPhones.
You can pay for products and services in person or online using your iOS device. With Apple Pay, you no longer need physical cards as transactions can be made by scanning your fingerprint, iris scan, or Face ID on your device.
Transactions are more secure than traditional methods. In addition, cashback and credit card rewards programs are available for those who use Apple Pay.
Can you get Cash Back with Apple Pay?
Yes, you can get cash back with Apple Pay!
All you need to do is make sure the store takes Apple Pay and have a card linked with your account. Then, make your purchase as usual and earn cash back just like before.
It’s that easy!
Way #1 – Link Your Cash Back Credit Card to Apple Pay
There are a few ways to add your credit or debit card to Apple Pay. One way is to use the Wallet app on your iPhone and follow the steps below:
Tap the plus sign in the upper-right corner of the app.
Enter your card information manually or scan it with your camera.
Verify your details and tap Next.
Choose how you want to use Apple Pay: With Face ID, Touch ID, or a passcode.
Tap Done and wait for a confirmation message that your card has been added.
You earn cash back according to your credit card used with Apple Pay. Also, some credit cards offer additional cash back when using Apple Pay.
Almost all credit card issuers work with Apple Pay.
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
Way #2 – Apply for the Apple Card
The card is a new electronic cash back card that gives you 3% back on all purchases from Apple and when using Apple Card with Apple Pay at selected merchants. Plus 2% back on all purchases everywhere else.
Given Apple Pay is accepted by over 85% of U.S. merchants it is easy to maximize your Daily Cash.
You can apply for the Apple Card on the Apple website or in the Wallet app.
Way #3 – Get Debit Card Cash Back with Apple Pay
There are a few different requirements to get cash back when using your debit card with Apple Pay.
First, you must link a debit card to your Apple Pay account. The store accepts Apple Pay and the store must offer cash back on the purchases.
For many people, this is easier than going to ATM.
How does Apple Pay work?
Apple Pay was designed to move consumers away from physical wallets into a world where their card is on their iPhone or Apple Watch.
This is done through contactless payment technology which allows users to make payments by holding their device near a contactless reader. The reader will communicate with the device and complete the payment.
Apple Pay is very simple to use.
What are the benefits of using Apple Pay?
When you use Apple Pay, there are a number of benefits that come along with it.
#1 – More Secure
Using Apple Pay is more secure than using a traditional credit card.
#2 – Cash Back
You can earn “cash back” rewards on your purchases. Just like you normally would.
#3 – Promotions and Deals
Apple Pay also offers a number of promotions and deals that can help you get the most out of your purchases. For example, right now Apple is offering bonus points for those who use their service to pay for their holiday gifts. This allows you to earn rewards like statement credits and real cash back on your routine purchases.
These promos are emailed to their Apple pay users.
#4 – Convenience
Plus, as more companies begin to accept Apple Pay as a form of payment, it’s becoming easier and more convenient to use this mobile wallet instead of carrying around a bunch of cards in your wallet or purse.
So if you’re looking for an easy way to make payments and rack up some rewards at the same time, then Apple Pay is definitely the way to go!
Is Apple Pay secure?
Apple Pay is a digital payment service that allows users to make payments using their iPhone, Apple Watch, Mac, and iPad. One of the main benefits of using Apple Pay is that it is much more secure than using a physical card.
Your card details are not stored on your device or on Apple’s servers, instead, they are encrypted and stored in the Secure Element on your device. In order to make a purchase with Apple Pay, you need to use your Face ID, Touch ID, or passcode.
When you make a purchase, a one-time payment number and code are created so that the merchant can’t access your credit card information. This makes Apple Pay more secure than traditional methods of paying with a credit card.
How do I know if a store accepts Apple Pay?
Apple Pay is a mobile payment system that allows users to make payments with their iPhone, iPad, or Apple Watch. It’s accepted at many stores and restaurants and can be linked with any other card you have.
To know if a store accepts Apple Pay, look for one of these symbols at the payment counter:
where can i get cash back with apple pay
When using Apply Pay, select merchants offer 3% Daily Cash back.
You need to check with app to see what each store offers.
Also, many stores offer BONUS daily cash!
What happens if I lose my iPhone with Apple Pay?
If you lose your iPhone with Apple Pay, you can use the Find My iPhone app to suspend or remove your card from Apple Pay.
You can also call Apple Support at 1-800-MY-APPLE (1-800-692-7753) if you need help suspending or removing your card from Apple Pay.
Cash Back with Apple Pay
There are a variety of reasons you may want cash back with Apple Pay. Some just want to earn more money when shopping; others want to skip going to ATM for cash back.
Apple Pay is the company’s contactless payment system that allows customers to make purchases by holding their iPhone near a point-of-sale terminal. Apple has been promoting its cash back program for quite a while now, but many customers have been asking how it works because it is a newer cashless digital payment method.
Yes, you can get cash back with Apple Pay.
You need to learn which payment type is best if you are trying to stick to a budget.
Know someone else that needs this, too? Then, please share!!
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Do you want to create a personal financial statement, but aren’t sure where to start?
According to Mint.com, over 65% of people have no clue how they spent money last month. So, you can probably be pretty sure even less know how their personal finance situation.
With rising costs for essentials like housing and education due to inflation, there is no better time to get an accurate picture of your current situation today.
If you’re wondering how your finances measure up, a Personal Financial Statement can be an invaluable tool in helping you understand where you stand financially and prepare for changes ahead.
This article will walk through creating a sample personal financial statement template with examples of what this document might look like based on your situation.
A personal financial statement isn’t just for your loan applications anymore, it’s an opportunity for transparency in your finances too!
What is a personal financial statement?
A personal financial statement is a document that summarizes your assets, liabilities, and net worth. A PFS can help you understand your financial health so you can make informed decisions about your money.
A personal financial statement template will typically include three sections:
Assets: This section will list all of the money and property you own.
Liabilities: This section will list all of the money you owe.
Net Worth: This section will calculate your net worth by subtracting your total liabilities from your total assets.
Your personal financial statement should be updated on a regular basis, typically once a year. This will help you track your progress and make sure you’re on track to reach your financial goals.
What are the benefits of creating a personal financial statement?
There are many great benefits of a personal financial statement.
By creating a personal financial statement, you can see at a glance how much money you have coming in, going out, and what your net worth is. This information can be extremely helpful in making financial decisions and setting goals.
Benefit #1 – Understand Your Financial Situation
This is why you must spend the extra couple of minutes to create a personal financial statement form.
Most importantly, you get a better understanding of your financial situation. This includes seeing where your money is going each month and how much debt you have.
What we call around here at Money Bliss – the 1000-foot look from above. The outsider’s perspective of what is going on with your finances.
Benefit #2 – Helps you track your progress
When it comes to personal finance, one of the best things you can do is keep track of your progress.
Tracking your progress should be important to you! By seeing everything laid out in front of you, it becomes much easier to make informed financial decisions that will help improve your overall financial picture.
Benefit # 3- Find some areas of improvement
Since a personal financial statement is a document that summarizes your income, expenses, assets, and liabilities in one place it helps you see the financial big picture. Thus, spotting areas for improvement are easier.
For example, if you see that you are spending too much money on non-essential items, you can make changes to improve your financial health.
Benefit #4 – Useful Tool to Set Goals
Next, it can help you set goals. Once you see where you stand financially, you can set goals for paying off debt or saving more money each month.
This aids you to make better financial decisions by providing a clear picture of your financial situation.
Benefit #5 – Snapshot to help you stay motivated
Creating a personal financial statement can be incredibly helpful in staying motivated to save money and achieve your financial goals. Seeing your progress in black and white (or, more accurately, green and red) can be a strong motivator to keep going.
Using a personal finance statement is especially helpful if you’re working towards paying off debt or saving for a specific goal. It can be difficult to stay motivated when you’re not seeing progress, but seeing the numbers going down (or up) can give you the boost you need to keep going.
Benefit #6 – Monitor your financial health
Creating a personal financial statement can help you monitor your financial health and make informed decisions about your spending and saving habits.
If you see that your expenses are consistently exceeding your income, for example, you may need to make some changes to ensure that you are able to meet your long-term financial goals.
Easier to spot opportunities to save money or invest in assets that will grow in value over time.
Monitoring your financial health on a regular basis can help you avoid debt problems and keep track of your progress toward financial goals.
What are the types of personal financial statements?
A personal financial statement is a form or spreadsheet detailing a person’s overall financial health. This statement is typically used to apply for business loans or other forms of financing. There are two types of personal financial statements:
The first type is the balance sheet, which lists a person’s assets and liabilities.
The second type is the income statement, which details a person’s income and expenses.
The balance sheet provides an overview of a person’s financial situation at a particular point in time, while the income statement shows how much money a person has coming in and going out over a period of time.
Both types of statements are important in helping lenders evaluate a borrower’s ability to repay a loan. As well as for you to monitor your personal situation.
What are the components of a personal financial statement?
A personal financial statement is not just a document that shows how much money you have in your bank account. It also includes other important components to show a well-rounded picture.
Most people know that a personal finance statement includes income, assets, and liabilities. But did you know there are actually four main components of a personal financial statement?
A personal financial statement varies from a traditional balance sheet that is used for a company.
Income
Your income is everything you earn in a year from all sources, including your job, investments, alimony, and more.
You should list all of your sources of income on your personal financial statement so you have a clear picture of what you’re bringing in each month.
Include all sources of income, even if they are irregular or one-time payments.
List after-tax income.
If you are married or have a partner, include their income as well.
Update your income regularly to reflect any changes (e.g., new job, raise, bonus).
This will help you make informed decisions about your spending and saving.
Expenses
This is the money you spend each month on things like your mortgage or rent, car payments, groceries, and other necessary expenses.
Here are over 100 personal budget categories for various expenses.
Assets
Assets are everything you own like your home equity or the value of your car and can use to pay your debts. This includes cash, savings, investments, property, and possessions.
Calculate your total assets by adding up the value of all your cash, savings, investments, property, and possessions.
So, is a car an asset? Well it depends if there is a loan against it.
Liabilities
Your liabilities are everything you owe money on. This includes, but is not limited to:
Mortgage
Car loan
Student loans
Credit card debt
Any other personal loans
Your liabilities also include any money you may owe in taxes.
How to create a personal financial statement – Part 1
There are a few key things you need to know in order to create a personal financial statement.
The first part includes what is needed for your net worth – assets and liabilities. The second part includes your current income, expenditures, and savings.
We will show you next how to collect all of this information, then you can start to work on creating a personal financial statement.
Step #1 – Determine your current assets and business profit
The first is your current assets. Your assets are everything you own and can use to pay your debts. This includes your savings, your home equity, and any investments you have. You will need to know the value of all of these things in order to create an accurate personal finance statement.
To determine the value of your assets, start by looking at your savings. This can be any money you have in the bank, including checking, savings, and money market accounts. Add up the total balance of all these accounts to get your total savings.
Next, determine the value of your home equity. This is the difference between what your home is worth and how much you still owe on it. To calculate this, look up the current value of your home and subtract any outstanding mortgage or other loan balances from it. This will give you an estimate of how much equity you have in your home.
Finally, add up the values of any investments you have. These can include stocks, bonds, mutual funds, and other types of investment accounts. Once you have all these values totaled up, this will give you an estimate of your current assets.
Step #2 – Determine your current liabilities
Your current liabilities are all of the debts and financial obligations that you currently have.
This can include things like credit card debt, car loans, student loans, and any other type of loan that you are currently paying off.
To get an accurate picture of your current liabilities, you will need to gather up all of your bills and statements so that you can see exactly how much you owe.
Step #3 – Determine your net worth
Your net worth is your assets – your savings, your home equity, and your stocks and investments – minus your liabilities. To calculate it, simply subtract your total liabilities from your total assets. This will give you your net worth.
Your net worth is a good indicator of your financial health.
It can help you make decisions about saving and investing, and it can also be a useful tool for budgeting. If you want to improve your financial health, focus on increasing your net worth by saving more money and investing in assets that will grow in value over time.
Your goal is to double your liquid net worth quickly.
How to create a personal financial statement – Part 2
Now, you have developed your next worth statement. The next step in creating a personal financial statement is to determine your monthly cash flow of money or annual cash flow.
This second part includes your current income, expenditures, and savings.
Step #1 – Determine your monthly income
Firstly, you will need your income flow section. This could come from your pay stubs, or if you are self-employed, your profit and loss statements.
Your monthly income includes all money that you earn in a month, including salary, wages, tips, commissions, child support, alimony, and any other regular payments that you receive.
Step #2 – Determine your monthly expenses
The next piece is to determine your monthly expenses. This includes things like your mortgage or rent, car payments, credit card bills, and any other regular expenses. You’ll also want to factor in occasional expenses, like doctor’s appointments or annual membership fees.
Your expenses can be divided into two categories: fixed and variable.
Fixed expenses are those that remain the same each month, such as rent or mortgage payments, car insurance, and minimum credit card payments. Variable expenses change from month to month and can include items such as groceries, utility bills, entertainment, and clothing.
Step #3 – Determine your monthly savings
Typically, most advice will leave out monthly savings. However, this. is a critical piece to learning how to FI – financial independence.
Once you have both your income and expense information, you can begin to calculate your monthly savings. To do this, simply take your total income and subtract your total expenses. The remaining amount is what you have available to save each month.
Maybe you just calculated this and realize you have a negative number (meaning you spend more than you earn each month), then you will need to make some changes in order to improve your financial situation.
It is important to note that a personal financial statement is not static.
Your income and expenses can change from month-to-month, so it is important to recalculate your statement on a regular basis. Additionally, as you begin to save more money each month, the amount available for savings will increase as well.
How to use a personal finance statement template
A personal financial statement is a snapshot of your financial health at a given point in time. It lists your assets, liabilities, and net worth so you can see the big picture of your finances.
You can use a personal finance statement template to track your progress over time and make changes to improve your financial health.
Here’s how to use a personal finance statement template:
Enter your information into the template. This includes details about your income, expenses, debts, and assets.
Review your numbers and calculate your net worth. This is the difference between your total assets and total liabilities.
Watch for comparisons. Compare your net worth from one period to another to track your progress over time.
Make tweaks. Make changes in areas where you want to improve, such as increasing savings or paying down debt.
Repeat steps 1-4 periodically. Then you can see how well you’re doing and make necessary changes
How to interpret a personal finance statement
A personal financial statement is a document that shows your current financial health. It lists your assets and liabilities, giving you a clear picture of your net worth.
Positive net worth means you have more assets than debt.
Negative net worth means you have more debt than assets.
Your personal financial statement will help you to set financial goals and track your progress over time. For example, if you want to become debt-free within five years, you can use your statement to create a budget and track your progress each year.
If you have a negative net worth, don’t panic! You can improve your financial health by paying off debts and building up your savings.
Creating a budget will help you make the most of your income and make headway on your financial goals.
How to use a personal financial statement to make financial decisions?
This is the important piece of becoming a millionaire.
A personal financial statement can help you see where your money is going each month and make changes to ensure that you are saving enough for your future goals.
Way #1 – Look at your current financial situation
Your personal financial statement is a record of your income and expenses over a period of time. This information can be used to make financial decisions, such as whether to save money or invest in a new business venture.
If you are looking to save money, you will want to compare your total income to your total expenses. If your expenses are greater than your income, you will need to find ways to reduce your spending. You may also want to consider investing in a savings account or retirement fund.
If you are looking to invest in a new business venture, you will want to assess your current financial situation. You will need to determine how much money you can afford to invest and whether or not the venture is likely to be successful.
Doing this analysis before making any decisions can help you avoid making costly mistakes.
Way #2 – Determine your financial goals
There are a few key things to keep in mind when you’re determining your financial goals.
First, you need to think about your short-term and long-term goals.
Your short-term goals might include things like saving up for a down payment on a house or car or paying off high-interest debt.
Your long-term goals might include things like saving for retirement or sending your kids to college.
Once you’ve determined your goals, you need to think about how much money you’ll need to reach them. This is where a personal financial statement can come in handy.
This information can help you figure out how much money you have available to put towards your financial goals.
Once you have an idea of how much money you need to reach your financial goals, the next step is to develop a plan for how you’re going to save that money. This might involve setting up a budget and sticking to it, investing in a specific savings account or investment account, or taking advantage of employer matching programs if they’re available.
Making smart financial decisions is important for achieving both your short-term and long-term goals. A personal financial statement can help you determine how much money you need to reach your goals, and develop a plan for saving that money.
Way #3 – Make a budget
Your personal financial statement can be a helpful tool when you’re trying to make a budget. This document lists your income and expenses and can give you a clear picture of your financial situation.
To use your personal financial statement to make a budget:
Look at your overall income and expenses. This will give you an idea of where your money is going each month.
What are Necessary Expenses? Determine which expenses are necessary and which ones you can cut back on.
Prioritize your List. Make a list of your monthly income and expenses, with the necessary expenses first. And drop the expenses at the bottom of the list.
How Much is Left? Determine how much money you have left over each month after paying for necessities. This is the money you can use for savings or other goals.
Adjust your budget as needed based on changes in your income or expenses.
Way #4 – Invest in yourself
There are a lot of things you can do to invest in yourself, but one of the smartest things you can do is to invest in your personal finance education.
In fact, one of the popular millionaire quotes from Warren Buffet is:
Invest in yourself as much as possible.
Warren Buffet
Investing in yourself is one of the smartest things you can do.
Way #5 – Stay disciplined
Making financial decisions can be difficult, but if you have a personal financial statement, it can help you stay disciplined.
A personal financial statement is a document that shows your income, expenses, and assets. It can help you track your spending and see where you can save money. That my friend is black and white information.
Making financial decisions can be difficult, but if you have a personal financial statement, it can help you stay disciplined and on track.
What are some common mistakes to avoid when creating a personal finance statement?
There are many common mistakes people make when creating a personal financial statement. This can lead to an inaccurate picture of your financial situation and make it difficult to make informed decisions about your finances.
Any of these common mistakes can also lead to problems down the road because you will be unable to meet your financial obligations.
Not including all sources of income
Not including all debts and expenses
Forgetting to track new sources of income
Overstating or understating expenses
Not properly categorizing expenses
Forgetting to update (or review) the statement regularly
Not tracking progress over time
Too scared to seek professional help if needed.
By avoiding these common mistakes, you can create a personal financial statement that accurately reflects your financial situation and helps you make better decisions about your money.
How often should a personal finance statement be updated?
You should update your personal finance statement at least once a year.
However, you may want to update it more frequently if you have significant changes in your income or expenses. For example, you may want to update your personal finance statement after you get a raise or buy a new car.
A Personal Financial Statement Template Example
A personal financial statement is a document that summarizes your financial health.
It includes information about your income, expenses, debts, and assets. This information can be used to make informed decisions about your finances.
There are many personal finance statement templates available online. Some banks and financial institutions offer their own templates. You can also find templates in our free resource library. Once you find a template you like, you can download it and fill it out with your own information.
When filling out a personal financial statement template, be sure to include accurate and up-to-date information.
This will give you the most accurate picture of your financial health. Review your statements regularly to track your progress and make changes as needed.
Time to Create A Sample Personal Financial Statement
When creating a personal financial statement, it is important to include all sources of income, not just your salary. This includes any freelance work, investments, or other forms of passive income. Additionally, make sure to include any government benefits or assistance you receive.
Excluding all sources of income will give you an inaccurate picture of your financial situation and make it difficult to create a realistic budget.
This is something you need to spend dedicated time doing to create a personal financial statement worksheet.
Over time, this wealth management tool will help you to become the next millionaire.
Know someone else that needs this, too? Then, please share!!