So, you want to be financially successful, and you’re working on it. That’s great! How will you know if you’re doing better than before? What markers have you identified to track your progress?
Why is tracking your progress important anyway? Tracking your progress gives you a sense of accomplishment and helps encourage you to continue this path, particularly when the times get tough. So, pick a few of the markers below and start tracking how well you’re doing, you’ll be glad that you did!
Look at how much debt you have, and how much you can afford to pay off
Is your debt out of control? Maybe it’s not, maybe it’s in hand and you can pay it off sooner than you thought. No matter what the situation, looking at how much debt you have versus how much in savings and income you possess creates a quick way to look at how you’re doing financially.
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As a rule of thumb, your ratio of debt to assets shouldn’t really exceed 35%. Anything above 35 is probably stressing you out beyond what it’s worth. If you’re above 35%, plan to reduce your current debt load (or work to increase your income, depending on your options). You’ll feel a lot better that you did.
This is a great way to see if your debt reduction strategies have been having an impact. Your credit rating should be improving over time, or at the very least maintaining the healthy ratio you started with.
Higher credit ratings open doors to financial options you haven’t even realised you need yet. You can often access different tiers of loans, better interest rates, and sometimes professional opportunities in the financial sector by having a better rating.
The only thing to keep in mind when using your credit rating as a financial marker is that it will fluctuate quite frequently based on when your payments process. So, don’t check it all the time, rather every 6 months – 1 year.
Expires on the 30/6/2019 so get in quick!
Here’s an easy way to earn a few extra dollars – simply sign up to Finder.com.au and get your free credit report instantly plus a $5 voucher from Woolies. You’ll then be able to refer friends and when they get a credit score and report you’ll earn another $5 Woolworths gift voucher for each referral!
Your debt ratio
Related to the debt calculation we did earlier is the debt ratio. The debt ratio is a simple division of your debts against your assets. Ideally this number should be quite low, and the lower it is the less debt you are currently in.
Wherever your debt ratio is, it will give you an idea of how much debt you are in and how you’re doing financially.
Using any or all of these markers is a great way to chart your financial progress over time. Chances are when you first crunch the numbers they may not be so pretty, but that can change over time. The key is to keep watching them over time to find out if the strategies that you’re employing are working, or if you may need to look for a new strategy.
No one marker provides a completely accurate picture, so it’s best to consider using these in conjunction with one another (rather than just picking your favourite). Whatever you decide to do, congratulations on the fact that you’re working towards financial success!
It may not seem easy, but it’s absolutely rewarding work. And it’s worth patting yourself on the back about, so always chart your financial progress!