Knowing where you stand financially is an important step in achieving financial freedom. Having a solid budget in place and sticking to it can make the difference between sinking or swimming. How can you tell where you stand financially? An easy way to determine what kind of financial shape you are in and whether your financial strategy needs an adjustment is whether or not the thought of money and bills leaves you feeling in control, or in a state of anxious nervousness. Below are five definite signs that your budget needs a makeover, and ways to remedy these problems.
You Don’t Know What to do When a Surprise Cost Pops Up
Life can be full of unexpected events that create new expenses, but your reaction to them can say a lot about the state of your finances. Some feelings of panic during these times are normal, but you know your financial strategy needs an adjustment if you feel over-whelmed by those unplanned-for expenses, it could be a sign that.
One suggestion for planning ahead for pop-up expenses is to have an emergency fund of one-fourth to one-half a year’s worth of your salary. If you don’t already have this amount saved up, find ways to cut spending or earn more.
There is Never a Surplus in Funds
You can be sure your financial strategy needs an adjustment is if there are not sufficient funds after all the bills are paid, or to build up your savings.
It is important to prepare a realistic financial plan and stick to it. Sit down and figure your monthly income, including additional sources such as child support received or income from a second job. Next list all of your expenses such as rent or mortgage, utilities, groceries, insurance, extras, and more. If your income is greater than your expenses, you are on the right track to being financially secure. If you are aware that your financial strategy needs an adjustment, look for ideas to minimize your expenses.
Then when a time comes when you want to go see a movie or out to eat, you will know whether or not you can afford it.
Another option is the anti-savings method. Using this method of saving, you pull from your savings to pay for necessities. If there is enough left over at the close of that pay period, then you can enjoy a movie, dinner, or a new outfit.
The Credit Card Balances Keep Rising
You always make the minimum payment or a little more and on time, but your balances continue to climb. This is a sure-fire way to tell your financial strategy needs an adjustment. Credit card debt is a crippling financial and emotional drain on a person.
The goal is to pay off all credit cards so that your finances will be for more important things. One way to do so is the snowball effect. Begin by paying off the credit card with the highest balance. Then, use the amount you were paying on the last card and add it to the minimum payment on the next lowest balance card. This way is preferred if you are a more results-driven person, as you will get satisfaction from meeting the goal of paying off a card quickly.
Yet another method in paying off credit cards is to begin with the card that has the highest interest. After that one is paid off, add the payment you were making on that card to the minimum payment on the next highest interest card. You will be saving even more money on interest this way.
And, an obvious rule to abide by while paying off your cards is to stop charging all together.
Thinking of Retiring Scares You
The goal of saving for retirement is to plan ahead so that you can enjoy your retirement by taking fun road trips, playing golf, or enjoying time with family and friends. However, if you feel a panicked feeling when thinking about retirement, that is one way to tell your financial strategy needs an adjustment.
As long as you are still breathing, it is not too late to begin saving for retirement. It is wise to plan for a long life, and save accordingly. A good rule is to save between 15 to 18 percent of your income in retirement accounts such as a 401k or an IRA.
The Thought of Money Makes You Feel Stressed
One way to tell your financial strategy needs an adjustment is if you cringe when you view your checkbook or make an impulse purchase.
Now is the time to take control of your finances. Take an honest look at them, and see where your weaknesses are. Then, take steps to reduce spending, save more, and get on your way to financial freedom.