Every now and then, it is important that you check how well you are doing financially. If you are generally the kind of person who settles for surviving from one month to the next, you will have to change your attitude towards money, so you can improve your financial future. Looking at your budget and your spending as an outsider can be a good idea, and you don’t even have to involve others unless you want to. Below you will find a few tips on how to conduct a financial health check for your household and spot opportunities to improve.
List Your Expenses
First, you will have to list all your expenditures. Make sure that you include the regular bills, such as rent, tax, insurance, and the cost of motoring. Don’t forget about those magazine subscriptions, the cell phone and TV bill, the credit payments, and the occasional days out, either. Every little thing adds up and reduces the amount you have left at the end of the month. Chances are that you don’t even realize how much you spend unless you create a detailed list.
Account for Your Income
Next, you will have to work out how much you earn from all your jobs, side gigs, and how much money you receive for a rental property, maintenance, or other sources, such as tax credits. If you find that your income is below your expenses, you have a serious problem to deal with and have to work on balancing out the two figures. If you don’t earn enough to cover all your expenditures, chances are that you are living beyond your means and will end up in debt.
Check Your Savings
Once you know about your regular income and expenses, it might be time to look whether or not you have any savings. This might be an old account your grandparents have opened, or an equity on your home. Whatever you have, you can use it to earn you interest of pay off your existing debt, so you can take better care of your financial health in the future.
Check Credit Interest
It is also crucial that you check how much interest you are paying on each account. Don’t think about the credit card accounts and loans only; if you bought a cell phone or a computer on credit, you might be paying over 40 percent. If you would like to find the right products for your credit rating and circumstances and reduce the rate of interest you are paying, you can check out Bonsai Finance to compare the different rates and conditions. This way, you can make better decisions about your money long term.
Review Your Investment Income
In case you have any investments, including a pension, a 401K account, or stocks and shares, it might be time to check what they bring on the table and whether they are growing or shrinking. If you are not familiar with the different products, it might be a good idea to set up an appointment with a personal financial advisor who can look through all your products and give you some helpful suggestions on where to move your money to increase your interest earnings. The same principle applies to your investment properties or collections you are keeping in the hope that their value will go up.
Prioritize Your Debt
As soon as you see clearly about your debt, it might be time to create a plan for paying it off. In case you have more than one account open and don’t know which one to settle first, you will have to evaluate your circumstances. If you are behind your mortgage, this should have priority. However, if you only have unsecured debt, you might want to pay off the account that charges the most interest and is the most expensive to keep open.
Work Out Where You Will Be Five Years From Now
You can’t create a detailed financial plan if you don’t know what you would like to achieve. It is important that you think about the long term finances, and decide where you would like to be in five years’ time. Whether you want to save up for a deposit to buy your first home or travel the world, your financial situation needs to be right. If you want to move house or renovate your bathroom, it might be time to make some smart investment decisions today.
Ask Yourself If You Are Living The Life You Want To
To complete your financial health check, you will also have to ask yourself whether or not you are happy with your life. If you are not happy at home or in your job, it will be much harder to keep on top of your finances. Whether it is insecurity, relationship, or work issues that are making your life harder, you’d better deal with the issues here and now, or you will stay disconnected, get too busy dealing with the problems, and will not have the time and energy to improve your financial decisions.
Look for Development Areas and Get Professional Advice
As soon as you have completed your financial health check yourself, it might be time to have a chat with a professional to confirm your findings. Once you know where you need to make improvements, you will have to explore the different opportunities and make sure that you are dealing with the problems one-by-one. Unless you are a trained accountant or personal finance expert, you will find it hard to navigate your way through the different options. Getting a professional advice to make the most out of your savings and reduce your credit gradually might be the best thing you’ll ever do.
It is important that you complete a financial health check every couple of years, or when you are about to make an important decision. Whether you decided to go back to college, change your job, or move to a new home, you will need to make sure that your money issues don’t stand in your way.