Did you manage to do the exercise on the worksheet to find out your Networth ? Hope you have.
Ok, now that we know our Networth, its important to know our surplus. From our surplus, we will go about deciding where we can invest our capital.
So 1st things 1st. What is a Surplus ? It is an excess of Income over expenditure over a given period.
Let us understand what is Income ?
Money received in form of a salary, remuneration, earnings, commission, interest or dividend income, rental or return on any investments made or for any services provided.
A lot of this income is received on a regular basis.
What is an expense ?
Expenses maybe payouts like salaries, costs and other costs incurred to get a return or get some earnings.
Under Income and Expenses statement, there are different heads and the expenses and income are grouped under each head.
A typical Income and Expense Statement looks like this :
|Your Primary Income|
|Your Spouse’s Income|
|Child Support or Alimony|
|Social Security Income|
|Real Estate Investment Income|
|Other income deductions|
|Rent or Mortgage|
|Gas & Electric|
|Food & Groceries (not dining out)|
|Telephone (not mobile phone)|
|Healthcare or Insurance Costs|
|Dental Care or Insurance Costs|
|Life Insurance Costs|
|Investment Real Estate Expenses|
|Business Income Expenses|
|Child & Baby Expenses|
|Other dependent expenses|
|Total Necessary Expenses|
|Credit Card Bills|
|Auto Loan (s)|
|Cable or Satellite TV|
|Mobile Phone (s)|
|Entertainment (not dining out)|
|Travel & Vacation|
|Pets, Pet Care and Pet Food|
|Clothing (above what’s needed)|
|Beer & Alcohol|
|Cigarettes & Tobacco|
|Total Discretionary Expenses|
As you can see from the sample above, these are the various Heads of Income and expenses.
Expenses are deducted from income and the surplus which remains is what is left for investing.
So will you prepare a Income and Expenses Statement for yourself ? Its so easy….
More next time….