The next step is to know where you stand today. You can get a clear picture of your finances by taking inventory of your assets and liabilities, and then determining your income and expenses for the year.
To make a list of your assets, start with the simple question: What do I own? Think of anything that can fall under one of these groups and write it down: cash equivalents (cash in bank accounts or the cash surrender value of any insurance plans), investment assets (stocks, bonds, business equity or real estate purchased for investment purposes) and personal use assets (personal items that can be sold for a significant amount of money like cars, your home, furniture or jewelry). Assign a cash value to each item on your list and add the numbers up.
To make a list of your liabilities, write down everything you owe money on, such as bank loans, installment payments, mortgages or credit card debt. Total up your liabilities and subtract them from your total assets to get an estimate of your net worth.
Knowing your net worth is a great starting point, and from there you can project where you will end up financially this year by estimating your income and expenses. Total up all the income you expect to make this year by listing all money you are sure to earn, such as your salary after taxes and fixed interest on investments. To be on the safe side, don’t include any income that is not guaranteed, such as bonuses at work.
Then, add up all your projected expenses by figuring out your monthly expenses the year before, and add in payments and purchases you expect to make this year, such as tuition fees or plane tickets for a planned vacation.
Once you have subtracted your projected expenses from your projected income, you will have your cash flow for the year. Will you increase your assets and add to your net worth? Or will you decrease it because your expected expenses are greater than your expected income?
Let BPI AIA and AIA Vitality help you boost your financial health! Visit a BPI branch near you and talk to a Bancassurance Sales Executive.