With the year almost halfway over, now is a great time to take stock of your finances and plan for the next six months and beyond. If you don’t know where to start, that’s ok! Here’s a checklist you can use to make sure you’re staying on top of your finances.
(Re-)Start Your Budget
A budget is simply a plan that helps you track and refine your income and spending. By understanding where you stand, you can create better short-term and long-term goals for your finances.
There are lots of different ways you can budget your money, but it starts with a few basic steps:
- Figure out your monthly income after taxes. This could differ from month to month, so it’s a good idea to get clarity on when and how much you’ll get paid.
- Calculate your expected monthly expenses. Start with fixed expenses such as rent and utilities, then variable expenses such as groceries and transportation.
- Make sure it all adds up. You need to ensure you have enough money to cover debt and fixed expenses, with enough left over for your savings and variable expenses.
There are a number of free and low-cost budgeting tools and apps like Albert or Prism to help make things easier. Many of these programs and apps automatically pull your purchases from your credit or debit card, giving you a snapshot of your spending and income. If you prefer budgeting manually, consider using a simple spreadsheet.
Check Your Emergency Fund
A 2018 report by the Federal Reserve found that 4 in 10 adults said they don’t have the means to cover a $400 emergency unless they borrowed money or sold something.
Having money set aside in case of emergencies like an unexpected car repair or a leaky roof can mean the difference between being on top of your finances and falling further into debt. An emergency fund is there to help you through rough patches, so it’s an absolute must to make sure you have one, and that it has a good amount of funds.
Most experts recommend an emergency savings account to have enough money for three to six months-worth of expenses. This amount may not seem realistic to you now, but if you set small savings goals you will get there eventually. Using a savings app like Digit could make it even easier for you to save by completely automating the process for you.
Monitor Your Credit Score
If you want to get a mortgage, take out a personal loan, or even refinance your home to a lower rate, monitoring your credit score could help put you reach that goal faster. The higher your credit score, the better chance you’ll have of getting approved for a loan with the best rates.
A few factors that contribute to your credit score include:
- Payment history: A record of payments you’ve made to current and past lenders
- Credit utilization: How much credit you’re using compared to the credit available to you
- Credit history: The length of time your accounts have been open
- Credit mix: The type of credit accounts you have like student loans, mortgages and credit cards
You can monitor your credit score using free tools online, and some credit card issuers offer free tools that update you on your credit score.
Evaluate Your Career Goals
Ask yourself if you really like where your career is going. Perhaps you like your position but desire a raise. Or, you’re ready for more responsibility and want to be compensated for it.
Whatever your goals might be, take some time to articulate what they are and come up with a plan to achieve them. For example, if you want to advance in your company, you could set up a meeting with your supervisor to see what you can do to be a more valuable employee.
Regularly establishing and reviewing your goals can help you find more satisfaction in your work and could help your bottom line.
Change Your Tax Withholdings
If you got a large tax refund or ended up owing more in taxes than you expected this year, you may want to consider changing your tax withholdings at your job. You may also want to rethink your withholdings if you experienced a life change such as welcoming a new addition to the family or getting married or divorced.
Changing your tax holdings help you in case you end up owing taxes because you’re not caught off guard and scrambling to find money to pay it. Or, if you got a large refund, the money could have gone towards other financial goals throughout the year instead of you getting it in one lump sum.
If you need to change your tax withholdings, contact the HR department at your workplace for help.
Readjust Your 401(K) Contributions
Many people get their 401(k) contributions deducted from their paycheck automatically and never think about adjusting their contributions again. But if your situation has changed since you started your job, you may want to rethink how much you’re contributing each month.
If you can afford it, consider increasing your 401(K) contributions. You’ll lower your taxable income and earn “free money” if your employer matches your contribution. Plus, you can feel good knowing you’re doing something for your future self by setting aside money for retirement.
As for how much to set aside to put into your 401(k), start with maximizing your employer’s matches. For example, if your employer will contribute up to 5%, start with that. You can increase your contributions as you go — up to $19,000 in 2019 according to the IRS.
Look for Ways to Save on Your Bills
Saving money may seem hard, but it can help you get ahead financially by beefing up your emergency fund or paying down your debt.
Here are a few ideas to help you start saving more:
- Eliminate unnecessary subscription services
- Bring your lunch to work instead of going out
- Negotiate bills with your cable, internet or auto insurance provider
- Carpool to work
- Find free or cheap activities around your neighborhood
- Do your own repairs
- Take advantage of coupons when shopping online
- Cook your own meals
- Workout for free using online streaming videos
Get Your Debt Under Control
Depending on how much you owe, your debt could be getting in the way of achieving your financial goals. That’s why it’s crucial for you to get out of debt as quickly as possible.
Start by figuring out how much you owe, and then formulate a plan to get out of debt. If you have multiple loans you need to pay back, think about how you can pay them all off in a realistic way.
In some cases, it may make sense to get a debt consolidation loan so you’re only making one payment and are better able to manage your debt. However, if you’re struggling with serious debt, it might be time to seek professional help.
A credit counseling agency may be able to help you reduce interest rates on your loans, making them easier to pay off. On the other hand, debt settlement programs like the one we offer at Freedom Debt Relief could help you lower the principal amount you own on your loans. This could make it easier to get out of debt faster, for a price you can afford.