Have you ever checked your bank account and had a moment of panic? The feeling that you are stuck under a pile of bills or have debt mounting uncontrollably is never a good one. Now is the time to examine if you are a financial disaster waiting to happen and to learn money habits to keep you above water. Ask yourself these questions to get started and make sure you are on track to avoid financial collapse.
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Do I understand my money?
The key to assessing your finances is knowing where your money actually stands. Your goal should be to set up a monthly budget and stick to it. First, assess all of your sources of income and then calculate all of your monthly expenses. Check your bank statements to categorize all of your expenditures into groups, like dining out, groceries, gas, rent, utilities, entertainment, shopping and other categories that fit your lifestyle. Don’t forget it include cash that you spent but don’t have a record of.
Decide if you are comfortable with the amount you are spending in each category and adjust accordingly to set a final budget. A big part of being successful with your budget is committing to track everything monthly. Find a system that works for you like an old fashion ledger, pen and paper, Excel spreadsheet or online account management service like Manilla.com.
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Where do I stand with savings?
Savings are a financial security blanket that will help you avoid financial ruin. Commit to setting aside savings every month for specific goals and for an emergency fund. You should work to save up six months of your expenses in an emergency fund to protect yourself from a financial disaster, like job loss or natural disaster.
The key to setting savings goals is to be realistic. Make a list of things you want to save for, ranging from short-term goals, like a new handbag or vacation, to long-term goals, like saving for a house or car. Calculate what you need to save every month to reach your goals. Don’t forget to assess how your savings every month will impact your budget and trim some of your expenses as needed. If you need an extra nudge to ensure you save, set up automatic savings deposits into your bank account.
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Am I managing my debt?
You should always know how much debt you have and have a good idea of your priorities to pay down your different debts. For example, high-interest debt, like credit cards, should be paid off first because you are accruing debt each month on the principle. Try to make sure you always pay your debt on time to avoid late fees and if possible try to make payments of more than your minimum due each month.
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