Freshen Up Your Finances
October 16, 2019
By: Gloria Martinez, Guest Contributor
Now that summer is winding down, this could be the ideal opportunity to do some financial freshening up, both literally and figuratively. So, if you find yourself worried about your finances, try some of these tips to dig your way out and sew seeds that will help your bank account blossom going forward.
Take some time to organize your financial files. If you’re unsure about what to pitch and what to preserve, an article in Kiplinger’s offers this general advice:
- Hang on to household bills for a year.
- Items like tax returns should be kept for six or seven years.
- You should keep things like medical history information and retirement plan documents for the long term.
The good news is most of this paperwork already is or can easily be stored electronically, which helps cut clutter. Electronic access can also make it easier to track variable expenses — like your utility bills — over the course of several months or years to set an accurate household budget.
Create a Budget
Now that you’re organized, it will be easier to build a budget if you don’t already have one. And creating a basic budget that works for you and your lifestyle is simpler than it sounds. Here are a few steps suggested by an article on Bank of America’s Better Money Habits site that should help you set up a budget:
- Determine your net income, which is your take-home pay after taxes and other regular deductions.
- Track your expenses, first making note of all your fixed monthly bills — such as your mortgage payment. Then record all your variable expenses — like what you spent last month on gas for your car or on your electric bill.
- Set goals — including some short-term goals that will take less than a year to achieve — and some long-term objectives, such as saving for retirement.
- Make a spending plan by taking a look at your fixed and variable expenses to get a pretty accurate estimate of what you expect to spend each month.
- Adjust your spending habits by evaluating where your money is going, comparing that to your list of goals, and shifting your spending to mesh with your most-important financial objectives.
Once you’ve established a basic budget, make sure to review it regularly to stay on the right track toward reaching your main money goals.
Evaluate Your Assets
It’s also important to take an inventory of your assets. For instance, it might be a good time to determine how much your house is worth if you’ve been thinking about opening a home equity line of credit or taking out a home equity loan to finance renovation projects. Depending on your existing debt load and interest rates, among other factors, it might also make sense to use some of those funds to pay down debt.
Other assets may include everything from your car to your retirement account. And taking a close look at these will probably help you set some short- and long-term goals the next time you review your budget. For instance, will you need to replace your car in the next year? And are you contributing the maximum to your retirement account? Depending on answers to questions like these, you may want to consider boosting your net income by taking on freelance work or tweaking your expenses by cutting cable or shopping around for less-expensive cellular service. You can also check to see if you’re eligible for discounts on your car insurance. Some insurers will offer lower-cost insurance if you’ve avoided accidents, drive less than 12,000 miles a year, or insure more than one vehicle under the same policy. Bringing in more money and spending less will create more wiggle room in your budget, helping you reach your goals faster.
Once you’ve evaluated your assets, you should give some thought about how you’ll protect those assets and the financial future of your family. If you or your spouse should pass unexpectedly, the benefits of a term life insurance policy can help your family. You can use an online life insurance calculator to figure out how much coverage you need.
While working on your finances takes some time and effort, you and your bank account reap the rewards all year long.
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