We’ve all been to the doctor for a check-up of sorts. Sometimes it’s as a preventative measure and sometimes it’s to find out what is wrong with us. There are so many check-ups we can go for as there are specialists for every area of health.
Have you ever had a financial check-up though? Just going through a basic procedure to see how well you are doing? As with a medical check-up this could either be as a preventative measure or perhaps you know there is something wrong and you need to find the cause.
Here is a quick 5 point financial check-up. If you answer “no” to anything then mark that as an area of concern.
1: Do you live within your means?
If you spend more money than you make then you are unfortunately headed for disaster. You may think that things will be okay, but in reality you cannot survive by spending more than you earn. Something needs to change and the only two factors that can change are that you either need to earn more money; or you need to spend less.
If you’re employed you probably don’t have much say on your earnings. You rely on what your boss decides to pay you and you work hard hoping for an increase. You can consider looking at other jobs, or perhaps freelancing or perhaps finding some clever way to earn a little more money. Catalog sales, house-sitting, renting out a spare room, giving someone a lift to work in exchange for petrol money, making lunches for people at work, etc… It may be worth your while or perhaps not. No need to decide anything now, just think about the situation.
When looking at your expenses though, you will probably find that there definitely are areas where you can cut down. The first step is to know exactly how much you actually spend each month so if you don’t know then start with the 30 day challenge of tracking expenses. The easiest way to curb expenses is to make a budget and then to keep track each day that you only spend what you allow yourself to.
You need to be strict with yourself and the first few weeks will be hard as you develop new habits. Discuss the budget with your family so that everyone understands what the situation is.
2: Are you debt free?
Debt is so easily available and it is often marketed as a good thing. Advertisers keep telling us what a great life we deserve to have and thereby entice us to take out debt.
Debt really enslaves you as you will always be working to earn more to pay off the debt. And when you can’t afford the repayments then you can simply take more debt and worsen the situation.
The ideal goal for everyone is to be debt free. It is completely possible and you can do it no matter what your current situation is. But, it may take you a few years of patience and constant work towards the goal. There is no quick fix, but with dedication you can do it.
The first step is to know what the current situation is. So list all your debt and find all your statements and accounts and calculate how much debt you have. A good habit to form is to take your store cards and switch to cash. So going forward make purchases with cash whilst you pay off the debt on the cards. And once the cards are paid off, close the accounts. I know it may seem too simplistic, but have a look at your own situation and try work out how you can do it.
Debt – no matter what it is for – is a bad thing. If you wish to ever be financially free then you need to manage your debt and set goals as to how to pay it off.
3: Do yo have an Emergency Fund?
An Emergency Fund is not only important for your financial well-being, it will also reduce your stress levels knowing that you have some money for those unexpected things that come up.
You can decide how much you need to save, and in doing so think about unexpected expenses that you have dealt with over the past year or two. A car service, medical issues, household emergencies, family issues, etc. Sometimes you just need extra money and knowing you have it will offer great relief.
4: Are you saving for the future?
This is something that we all know we should be doing, but statistics show that the majority of people are not saving enough for retirement. The amount of money you can save is unfortunately linked to the above 3 questions as there is only a finite amount of income you earn, and somehow all these things need to be managed.
When reviewing your savings have a look at any retirement-type savings you have and tally up the savings. This is also something that should be discussed with your family as it will affect the family once you retire.
Also look at your debt again, generally speaking, the interest you pay on debt is higher than what you earn off investments. Often it is better to pay off your debt than to invest.
5: Do you feel in control of your financial situation?
It is great if you answered “yes” to this question, but if that is not the case then you need to work on this and sort things out. Being in control of your finances does not need to be complicated or time consuming and you do not need to be any sort of expert.
All you need to do is to be conscious of the above 4 questions. Managing your money is a day-to-day task which never ends. If you don’t feel like you know what you are doing then you just need to start somewhere and make a little progress each day, week or month.
Don’t wait until you feel you know what to do; just start taking control of your money now! Start by calculating your Financial Health