7 Point Checklist to Analyze Your Current Financial Situation, Part II

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Last week, we talked about the first four points on the seven-point checklist I recommend every actor take a look at to analyze his or her financial information. Here is the rest of the list to help you get control of what may seem like an insurmountable task. Take the steps necessary to become more educated and, therefore, more powerful with your money.

1. Savings From Cash Flow
What is your savings rate? Do you save a specific amount from each paycheck or are you an accidental saver? Most of us are accidental savers, meaning the plan is “if there is money left over I’ll move it to my savings account.”

From history and math, we know that the ideal savings rate is between 15%-25%. If you are a systematic saver, check where you fall on that spectrum. If you are an accidental saver, it’s time to make some rules. My suggestion is to not jump in the deep end at 25%—start with something comfortable and work your way up over time. The good news is, you don’t need anyone but you to get started and the amount you save has more impact on how much money you’ll have later in life than anything else.

2. Current Debt
This goes back to knowing your numbers and definitions. What kind of debt do you have? Mortgage? Credit card? Student loans? Personal loans? Home equity loans? 401(k) loans)? Life insurance loans?

READ: Actors, Own Your Student Loans So They Don’t Own You

Next, what is your balance for each of these? Your interest rate? Is there a set payback period? Are there penalties for early repayment? Are you going about this in a systematic way or just throwing money at the debt hoping it goes away? The two most common methods are exact opposites of each other. One says to pay off the highest balance with the highest interest rate first, the other aims for smaller victories along the way by paying off the smaller balances first and then, like building a snowball, roll those payments into paying off the next debt.

3. Net Worth
Net worth is the whole shebang. It’s the number that represents the outcome of every financial decision you have ever made. It is the number we aim to consistently grow. It is the number that will determine when you can retire. With all that importance, you might think there is a complicated algorithm to get there...but there isn’t.

Add up the value of everything you own (stuff and money) then subtract everything you owe (debts and internal taxes for investments) and that’s it. If you want to increase your net worth, either increase your assets or decrease your debts. That is the essence of financial planning, finding the safest, most efficient way of growing your net worth as large as possible.

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Bailie Slevin
Bailie Slevin is the founder of Entertaining Finance, a business management and financial consulting firm geared specifically towards creatives.