Whether you’ve established a monthly budget or just guess how much you spend every month, it’s important to evaluate your overall finances to make sure you are using your money wisely. Going over your financial paperwork also enables you to catch issues before they get worse.
Here are five key things you should review closely on a regular basis:
1. Check your spending habits
You never want to overextend your finances. Look at your regular expenses and establish a budget based on your income. Do not spend more than you make, and you should also stop short of spending every penny you earn unless absolutely necessary.
2. Establish an emergency fund
You should put aside a little each paycheck until you have a few months worth of savings to make sure you can cover any unexpected expenses. It doesn’t have to be a lot; even saving $25 each paycheck will eventually add up to a nice sum.
Experts say it’s good to have 3-6 months worth of expenses saved in case you lose your job or have some other major expense thrown your way.
3. Pay off debt
Make a concerted effort to pay down debt as quickly as possible. Try to pay more than minimum payment amounts to cut down the principal. And always focus on high-interest debt first; that’s where you’re paying the most interest, so you want to eliminate those first.
4. Monitor your credit report
Check your credit report regularly. Having excellent credit is important to your overall financial health. Monitoring your credit score will tell you if your spending habits are negatively affecting your credit report.
You will also be able to catch any suspicious activity and report it before it does damage to your credit.
5. Save for retirement
Retirement may seem far away, but it’s important to start saving now so that you have a nice sum to take you through your golden years.
Invest in an IRA or your company’s 401k, even if just a little per paycheck. And take advantage of any employer-match contribution programs; if you don’t contribute the maximum allowed in the matching program, you’re leaving free money on the table.
Managing your finances can be tricky. The staff at Root Tax can help you answer any questions you may have about how to work with your monthly budget. Reach out to us at any time.