Your finances are a part of your life that you’ll need to manage constantly. But doing so can be overwhelming, and the work to do can be hard to prioritize. Before you get fed up with the process of reviewing your finances, check out these six areas to focus on.
1. Your Savings Practices
Does your money seem to slip through your fingers like grains of sand? If so, you’re likely not saving strategically. Review how — or whether — you make an effort to save with each paycheck. If it’s time for a change, consider treating your savings transfer like an invoice.
Like most people, you’re probably committed to paying your bills on time. Act as if your regular transfer to savings is a requirement, and you’ll be more apt to stick with it.
Start with an amount you won’t miss and set up an automatic transfer to take place on your payday. Increase it by $5 or $10 each pay period until you get to the point where you feel a pinch. Then, let it ride and see your savings soar.
2. Your Credit Score
A bad credit score can knock you out of the financial game before you even get started. If your score is low, first identify the factors that are dragging you down and focus your efforts there. Credit utilization, credit mix, on-time payment history, credit age, and new credit are the factors that determine your score.
To give yourself a nearly pain-free boost, consider a credit builder card. Because these cards require an initial deposit or funds transfer, they’re typically easy to qualify for. Each time you pay your bill, you solidify your payment history. Over time, this consistent track record will improve your score.
3. Your Loan Rates
Do you know how much you’re paying in interest on your loans? If you’ve been making loan payments blindly, you may be losing more of your hard-earned cash than necessary. Review your active loans and rank them from the highest to lowest interest rates.
After you’ve completed your audit, consider whether you have any money-saving opportunities available to you. Student loans can be consolidated, credit card rates can be negotiated, and payoff efforts can be accelerated. Any cash you recoup can be dedicated to bolstering your savings account or reducing revolving credit balances.
4. Your Insurance Coverage
Insurance is essential, but overpaying for it isn’t. Review your renters or homeowners insurance and auto coverage every six months to keep tabs on rates. Bear in mind that building replacement costs are increasing due to inflation, so comparing prices across homeowners insurance providers is critical.
Check to see whether any past accidents or claims are impacting your rate. If so, reach out to your agent to see when those items will fall off of your record. Typically, most claims are not counted against you after five years.
Consider, too, whether increasing your deductible could save you on your premium. If you raise your deductible, though, make sure you can cover this increased amount should you need to make a claim.
5. Your Bank
Are you still banking at the same institution where you opened your first account? While your bank may be sufficient for your purposes, it’s worth a look to see what else is out there. Online banks, competing local institutions, and credit unions have unique offerings you should investigate.
Check online for the features each one offers and weigh them against your needs. If you decide to make a change, work with your employer to adjust your direct deposit. Update any other direct deposits, automatic transfers, and bills before you close your current account. You’ll also want to make sure closing your account won’t negatively impact your credit score or other lines of credit with the institution.
6. Your Budgetary Leaks
If you’ve been running on financial autopilot, it’s time to get focused. Review your family budget planner and pinpoint any weak spots or mystery bills you seem to pay. Identify reductions you can make for the least amount of pain and hassle.
For example, television and streaming services can be a big drain on your budget. Consider whether you can reduce your subscriptions or share them with a family member or friend (provided the service allows it). If dining out is a weakness, prioritize your outings for food you love and can’t easily make yourself. Menu plan for weeknights and make bigger dinners to have extra for the following day’s lunch.
Keep Up the Momentum
Now that you’ve put in the work, it’s time to reinforce your newfound financial habits. Set a weekly date to check in on your budget. Since you’re likely making purchases and paying bills regularly, a weekly review can help you stay on top of things. Monitor your credit score monthly to line up with the typical reporting period for most creditors. All other action items can be reserved for quarterly, semiannual, or annual reviews.
You may begin to feel like you’re treating your finances like a business, which isn’t a bad thing. No matter your profession, you’re in the business of “you.” There’s no one else as invested in your success as you are, so it’s in your best interest to be diligent. When you put forth consistent effort toward improving your finances, you’ll soon be proud of your progress.