Before the busy fall and holiday seasons start, make sure you’ve got a handle on your money and that your financial health is headed in a positive direction.
#1 – Assess Your Financial Health
Before you can make adjustments to your finances, you need to know where you stand. Philip “PT” Taylor, CPA, founder of PT Money, recommends taking the last couple of months of spending data from your bank and looking for recurring charges as a way of identifying expenses you can trim. “When I do this,” he says, “I often find things that I’m no longer using and need to cancel, freeing up money in my monthly budget.”
After assessing your financial data and performing a spending checkup, you can move onto other steps that will help you boost your financial health.
#2 – Budget
Budgeting doesn’t always have to mean sacrifice. What it does mean is knowing where your money is going, and identifying needless spending that you can eliminate.
The most important step is to “identify financial habits where positive changes are needed to improve your credit,” advises Leslie Tayne, financial/debt attorney at Tayne Law Group and author. “Budgets have only one rule – do not spend more than you earn. Account for all of your expenses – like utilities, rent, food, credit cards and loans, and car insurance – and essentials in your budget plan. If you see that you are spending a lot on eating out for lunch every day, make an effort to cut back on or eliminate it completely. If you carry high-interest credit cards, make it a goal to cut back on your nonessential expenses so you can direct more money toward repaying your credit card.”
Then, track your budget daily. If you’re struggling, consider getting help from a financial planner.
#3 – Create an Emergency Fund
Life can be a series of unexpected, and often costly, events. Developing an emergency fund will not only provide peace of mind that you can overcome these obstacles, but that you’ll also be financially prepared to deal with them when they arise.
“Your emergency fund should consist of at least six to nine months of income,” recommends Tayne. “Try your best to add at least 10 percent of your income each month into the emergency account. You’ll remain more organized if you regard your emergency fund as an additional expense that is factored into your budget.”
#4 – Investing
Investments can play a significant role in your financial health. Perhaps you’re afraid to invest, thinking you don’t have the knowledge to do so effectively. Maybe you’re already investing, but seriously question its value.
If you’re a newbie, get expert advice before dabbling in the stock market. If you’re already investing, review your portfolio. Evaluate each investment, and get rid of those that aren’t performing. Failed investments will bring down your portfolio’s value and cost you in the long run.
# 5 – Identifying Insurance Needs
Perform an insurance checkup by getting out all of your policy documents so you can review and assess the amount of coverage you and your family have. If you’ve experienced a life-changing event, such as the birth of a child or a raise, you should consider increasing your life insurance to make sure you still have a proper amount.
Young families in particular should consider life insurance, as it’s one factor that can easily improve financial health. “Once you start having kids, it’s important to nail down a simple term life insurance policy,” says Taylor. “This used to be a big pain and hard to setup. But now with all the online platforms, it’s easy to find insurance and get the process going.”
Even as summer approaches, you can stay on top of your financial health. “No one can pay 100 percent attention to their finances 100 percent of the time,” reminds Taylor. “So you need to create systems that, over time, will create positive results. I’m a huge fan of automatic savings for my retirement accounts. Paying myself first ensures that I have consistent financial success.”
It might not be fun or easy, but it is worthwhile to spring clean your finances. First, assess your financial health and create a budget. Commit to building an emergency fund and investing, and then upgrade your insurance. When summer rolls around, you’ll be well on your way to a healthy financial future and you’ll feel more confident about your financial situation.