What is included in the analysis of the current state of family finances

Family financial analysis

To learn to fill out the family financial three tables: 1. family daily expenditure statistical table, 2. family monthly income and expenditure table (also known as profit and loss account, cash flow statement), 3. family monthly balance sheet, to organize and summarize their own family's financial situation. Here's how to analyze your family's finances using the data compiled in the three tables.

Taking a young couple as an example: Zhang Jun, 28 years old, advertising designer, with a monthly salary of 6,000 yuan. His wife, Liu Ping, 26 years old, is a middle school English teacher with a monthly salary of 3,000 yuan. Through a month to carefully fill out the family financial three tables, organize the family's basic financial data: pre-tax monthly income of 9,000 yuan, after-tax monthly income of 8,470 yuan, monthly expenditures of 8,716 yuan (including taxes), the monthly surplus of 284 yuan, family current assets of 20,000 yuan, assets in kind of 675,000 yuan, the total liabilities of 260,000 yuan (mortgage), 1200 yuan of monthly mortgage payments, net assets of 435,000 yuan, the total assets of 635,000 yuan, the total assets of 6,000 yuan. 435,000 yuan, total assets of 695,000 yuan (see tables I and II).

Both parents have a home and are in good financial condition, with no support burden. The couple has agreed to have a child in 2 years, and their financial goals are:

1. Prepare a certain amount of money for the child's upbringing and education before the birth of the child; 2. Pay off the mortgage early; compress the monthly mortgage payment by half to 600 yuan; 3. The two of them don't have any commercial insurance except for social security, so they supplement a certain amount of commercial insurance for the sake of family protection against risks.

To achieve the above financial goals,, you can increase income, reduce spending, change the asset structure or borrow new debt and other methods to achieve. How to choose among the above methods and which expenses or incomes should be adjusted requires further analysis of the client's balance sheet and income/expenditure statement by calculating various financial ratios, so as to find out ways and measures to improve the client's financial situation with a view to realizing the client's financial goals. The following six financial ratio analysis indicators (taking the financial data of Zhang Jun's family as an example) are usually used to calculate:

1. Net assets repayment ratio = net assets ÷ total assets = 435,000 ÷ 695,000 = 0.625. This indicator reflects the level of the client's ability to comprehensively repay debts. Theoretically, the repayment ratio varies between 0-1. Generally controlled at 0.5 or more, if too low, once the income level is reduced is likely to be insolvent. If it is too high, it also means that the customer may not be making full use of their credit line by borrowing to further optimize their financial structure.

2. Total gearing ratio = total liabilities ÷ total assets = 260,000 ÷ 695,000 = 0.374 (and the repayment ratio is equal to 1) This indicator also measures the customer's ability to repay the debt, and its value varies between 0-1. It is generally kept below 0.5 to minimize the possibility of a financial crisis due to illiquidity. If the ratio is greater than 1, theoretically, the customer has gone bankrupt.

3. Debt to Income Ratio = Monthly Debt ÷ Monthly Pre-Tax Income = 1,200 ÷ 9,000 = 0.133. From the perspective of financial security, if the indicator is below 0.4, the financial situation is good. If it is greater than 0.4, it will be difficult to continue borrowing and financing. To maintain financial liquidity, the indicator is generally around 0.36 is more appropriate.

4. Liquidity ratio = current assets ÷ monthly expenses = 200000 ÷ 8716 = 2.295. The liquidity of the assets is the ability to liquidate quickly under the conditions of possible future loss of value. Current assets should generally meet six months of expenses (i.e., the indicator is approximately 6), and the asset structure is relatively liquid. However, since the return on liquid assets is generally not high, for those clients with guaranteed income or very stable jobs, their ratios can be adjusted downward, and more funds can be utilized for capital market investments. But for those customers whose jobs are not stable, the ratio can be adjusted up to 12 or even higher, once the loss of jobs and sources of income, liquid assets to meet 12 months of family expenses.

5. Savings Ratio = Monthly Surplus ÷ Monthly After-Tax Income = 284 ÷ 8470 = 0.034. This is an important indicator of a client's ability to control their spending and be able to increase their net worth. In the U.S., influenced by the concept of high consumption and low savings, the savings rate of residents is generally low, with an average savings ratio of only about 5%-8%. For a young family like Zhang Jun's, the savings ratio is only 0.034, which is a typical "moonlighter". If you want to realize your financial goals, you must first try to improve your savings ratio.

6. The ratio of investment to net assets = investment assets ÷ net assets = 0 ÷ 425,000 = 0. This means that the net assets of Zhang Jun's family

mainly consists of physical assets such as self-owned housing and cars, and no investment assets to make their net assets increase in value, which should be maintained at more than 0.5 in general, in order to ensure that the growth rate of their net assets is more appropriate.