Springtime signals new growth and the joy of sunnier days ahead. This can also coincide with our personal financial situation as well. The first full month of spring is Financial Literacy Month. This is a great time to focus on ways to improve our finances going forward, creating even brighter days ahead in more ways than one. Want to get started? Here are the…
5 Tips to Improve Your Finances:
1. Assess Current Situation and Create a Plan
The first step to getting a handle on our finances is to know what we are allocating all of our money toward. Assessing may take some time, but it will be well worth it in the end.
- First, review all fixed expenses such as your mortgage, rent, utilities, and insurance payments. Next, list out all other expenses and give approximate ranges for what they currently cost each month. This can be a real eye-opener if you haven’t sat down recently and looked closely at each expense.
- Consider what expenses are essential. Also, locate nonessential, recurring charges that can be eliminated. These may include certain television apps or channels, gym memberships, online subscriptions, and other clubs or online memberships. Think about how much these are used and if they are truly adding value to your life.
- Finally, sit down and create a budget that will work for you. It has to be one that you can realistically stick to as well. Some people prefer a precise budget, while others want a little leeway in their spending. The key is to create one that best suits your needs and personality.
2. Evaluate Credit Scores by Reviewing Credit Reports
These days it seems everything is based on one’s credit score. If it is high enough, we may not have to pay a deposit on a new utility account, we could be eligible for a higher credit limit on a credit card, and we may receive more loan offers with lower interest rates. Now is a good time to assess where you are when it comes to your credit rating and work on further improving it.
- The first step is to obtain a copy of your current credit reports. While most banks offer free credit scores, you’ll want to examine the specifics that are on your credit report, which is what leads to that credit score in the first place. Anyone can order a credit report for free once a year.
- Once the credit report is received, go through it line by line to determine if there are any mistakes reported. These mistakes may be late reporting by creditors or could be a sign of fraudulent activity, such as identity theft.
- If any mistakes are found, contact the credit agency (Equifax, TransUnion, and Experian) directly. Each one has a specific process for requesting changes.
3. Set up Automatic Deposits for Things That Matter
There are certain things that are worth saving for, and setting up automatic payments can easily keep us on track to meet our goals. Two of the main ones are recommended to be an emergency fund and a retirement account.
- As we all know, emergencies happen. Unexpected circumstances arise, and if we have already begun preparing for them, we will be less stressed if and when they actually do occur. The best way to do this is to initiate automatic deposits into a separate savings account each month, and only touch this account in true emergencies.
- Retirement is another important area to automate. If your employer offers a retirement plan, possibly including a free match up to a certain amount, be sure to take advantage of it. If the employer says they will match 3%, then be sure to invest at least 3% of your checks in order to obtain this extra money. We don’t just want to set up an amount to be invested automatically and forget it, though. Scheduling regular reviews, possibly quarterly, to assess how your retirement account is doing and to consider reallocating funds is also important.
4. Create a Plan to Pay Off Debt
Debt comes in many forms, and two of the largest on average are credit cards and loans. Both of these vary on the level of interest paid each month, and that interest can add up fast. Knowing what you owe overall and what solutions are available are the first steps toward improving your financial situation when it comes to the realm of debt.
- Gather up documents for all loans, including mortgages, auto loans, student loans, and any personal loans. Make a list of amounts owed and the interest rates on them. Next, do the same for all credit cards.
- Create a plan, with a timeframe, to pay off each one. Priority can be based on which ones have the highest interest rate, or on the ones with the lowest amounts owed.
- Another option is to consider consolidating some or all of this debt into one loan and making one payment per month. Many people find this easier. It also allows for just one interest rate instead of various ones for the different loans and credit cards.
5. Get Financial Records in Order and Keep Them That Way
Financial Literacy Month is a great time to organize financial records. If they are set up right the first time, it will be easier and less time-consuming to keep them organized going forward. This may be done through creating a paper filing system, an online filing system, or both.
- Create files for yearly tax records, investments, retirement accounts, loans, credit cards, and other expenses. Then, during the year, if new ones arise, add a new set of files. Also, create a spreadsheet or other type of document providing an overview at a quick glance.
- Every April, purge these files of anything no longer necessary. Be sure, however, to know what is important to keep and for how long.
Understanding where you are and how you can improve your finances is an important, ongoing action that will not only help you be successful, but also solidify your peace of mind. Financial Literacy Month is a good time to schedule reviews and take action to prepare for the year ahead.
For more information and to learn how Webb Insurance Group may be able to assist you or improve your insurance coverage, contact us today.
*This content was not written by a licensed insurance agent.*