Review Your Financial Reality

Financial Reality Check: Know Where You Stand

Welcome to Step Two of our Financial Freedom Framework! It’s time to review your financial reality. Think of this step like checking your GPS before you head off on your dream trip. If you’re going to Rome, the journey will look very different if you’re starting from Sydney, Australia rather than Milan, Italy!

That’s why it’s essential to understand your financial starting point clearly and simply. Dive in to review your financial reality right now!

Capture All Your Income Streams

First things first—grab your favorite notebook, app, or spreadsheet and jot down every bit of money coming in. Include your salary, freelance gigs, side hustles, rental income, dividends—everything!

Be honest about how much time you spend earning that money. Are you spending hours commuting or giving up weekends for extra projects? Understanding the full picture of your current income will help you accurately assess your financial reality.

Uncover Your True Expenses

Next, let’s talk expenses. When you review your financial reality, you’ll want to know exactly how much money you spend each month on essentials like rent, utilities, groceries, insurance, and bills. Don’t stress—you don’t need to track every tiny purchase. Simply grouping your expenses into general categories is perfectly fine.

A helpful tip: consider using a simple budget to track your income and expenses each month. A budget is a straightforward way to see clearly where your money comes from and where it goes, helping you keep tabs on your financial situation.

Needs versus Wants: Know Yourself

Here’s the fun part: identifying your needs versus your wants. Your expenses fall into two categories: needs and wants.

Needs are essentials like housing, food, and transport. Wants are the nice-to-haves, like dining out, subscriptions, or the latest gadgets.

Neither is wrong; we all have both! For now, simply recognizing which expenses are needs and which are wants gives you valuable insight into your current spending habits. Remember, this is about awareness, not judgment.

Savings: Know Your Safety Net

Now let’s clearly record your savings – this is the money you’ve set aside in various accounts such as savings accounts, emergency funds, and retirement accounts. Knowing exactly how much you’ve saved gives you peace of mind and clarity about your financial position.

No need to set goals or change habits yet—just take note of your current savings across all accounts.

Investments: Is Your Money Working for You?

Lastly, simply record your current investments and understand their performance. This step is about seeing how effectively your money is currently working for you. Don’t worry if you’re not investing yet; just capture where you currently stand.

Make a note of any investments you currently have, such as stocks, bonds, real estate, or retirement funds, and record their performance if known. How much money did you have at the beginning of this year and this month in each of your investments? How much money do you have today. Is the current rate return aligned with what you think the return in your investment would be?

Understanding your investments gives you insight into how your financial situation is shaping up.

Quick Financial Reality Checklist

Let’s clearly summarize the steps to help you accurately review your financial reality:

Identify all income sources – be honest and thorough.
Create a simple monthly budget – track your income and expenses.
Distinguish your needs from your wants – recognise where your money goes and why.
Record your savings clearly – know exactly how much you have in all accounts.
Evaluate your investments – simply note your current investment performance.

Take Action Today!

To make reviewing your financial reality easier, explore articles, budgeting apps, or online financial calculators specifically designed to help you clearly understand your current financial position.