5 Easy Steps to Determine Your Financial Status So You Can Break Free of Your Job Sooner
Here are the five steps to help you determine your financial status so you can break free of your job as early as possible.
A lot of people want to know what they can do with their lives even when they've reached a certain age. Some may decide that they want to work less, while others may want to transition into some type of business or start their own business. On top of this, there might be some who haven't even thought about working because they're content with life or have other plans for the future that don't include employment. However, these people may not be able to handle the financial responsibilities associated with having a job.
Surprisingly, many of these people don't take the time to calculate their financial status before they retire. Some would say "I'm sure I'll be fine" or even "I don't have to work like I used to." They may believe they're in too good of a situation because they're financially stable or that they don't need to worry about money since they made it this far.
You can use your current knowledge and information as well as some simple calculations to figure out how much you will need to live comfortably after you retire.
There are times when you may need to reach out to professionals for help with your assessments, but there are also many things that you can do on your own.
Let's walk through each step and break down some of the information that you need regarding your budget and how it can affect your financial status.
STEP 1 : YOU NEED TO KNOW WHERE YOU'RE AT RIGHT NOW
Before you even start the process of calculating how much money you'll need in retirement, you should already know exactly where you stand financially. Maybe this is something that is on your mind, but hasn't needed to be addressed yet. It may be that you haven't checked your finances or haven't used your credit card in a while.
You might have a general idea of how much money you have in there, but this is something that you need to clarify so that you can get more accurate information. If your job has a retirement plan (401k or similar), then this will help you build the groundwork for making decisions about what's going to happen when you retire.
Try to locate all of the statements from all different sources instilling income and spending over the last couple of months. You may find bank statements, pay stubs, credit card receipts, etc.
It's important to note how much money you have in there and where exactly it all comes in from. Maybe you're missing certain things, but this is also something that you must address if you want to figure out your financial situation.
2 . CALCULATE YOUR ANNUAL EXPENSES
When you work for a company, the most common way for them to calculate paychecks is annually. If you are working for someone else and your employer does not provide a retirement plan and benefits (at least not any type of benefits that come standard), then this step can be skipped.
Regardless of whether or not your employer provides a retirement plan and benefits, you will still only be paid what is stated on your paycheck. This can cause problems if you don't know how much money you need to live comfortably when you're no longer employed.
You must calculate the direct expenses that are outlined in your paycheck each year. You will also have direct expenses from other places such as rent and purchases that you don't pay for with cash, although these will not be included in this calculation.
You might have some things like taxes that are just due every year, such as state or federal taxes.