With interest rates on the verge of climbing, economy on loose footing, and unemployment still above 6%, I think this is a good time to address the following questions and have further discussions about your financial well being.
- Are you living within your means? or are you living paycheck to paycheck?
- Do you feel you’re getting financially stronger?
- How are you tracking and measuring your progress?
Understanding your expenses is the vital first step in assessing your financial health. You must figure out where you are spending your income., therefore, every bill and every expense must be accounted for.. If you haven’t already done so, start itemizing your expenses. While conducting monthly reviews, you should revisit and justify all expenses. Vet them out, and make sure don’t accrue new ones.
The next step is to plan for a budget. It must be detailed and comprehensive. It may vary month to month, but common expenses such as mortgage/rent, utilities, insurance, phone/cable, car payment should not vary too much. On the other hand, food and entertainment may fluctuate depending on your lifestyle.
Following a strict budget can help you put new spending in perspective – posing the questions such as: 1) can I afford this new handbag, should I buy this wireless entertainment center, 3) do I really need a new car, etc,…
a list of metrics to check if you’re income supports your current lifestyle.
Follow those essential steps and slowly you will find it easier to gauge your spending and soon enough you will notice a gradual increase in your savings’ account. It’s poor judgment to put most of your expenses on credit cards, and can easily get you in trouble – this is the leading factor for living outside our means. If you can’t afford it, don’t buy it. Be smart and get financially stronger now!