Give your finances a checkup
Just like your physical exam, you should routinely do a financial exam. There is no time like the present to review your finances. Use the following checklist to give yourself a money checkup.
- List all sources of income so you know exactly how much you have to spend each month. Then make a list of all your monthly bills, such as mortgage, utilities, groceries and credit card debt. If you do not have enough income to cover all the bills, you are in serious trouble and need to come up with a better plan. You should not rely on credit cards to cover a lack of income.
- Put together a plan to reduce credit card debt and other loans. Use the debt snowball method to pay off credit card balances. Choose the card with the lowest balance to pay more than the minimum monthly payment. After that credit card is paid off, roll over those payments into another credit card. Continue doing this until all credit card debt is paid off.
- Call credit card companies to negotiate a better rates. The lower your balance, better your credit score, and more consistent you are with paying cards on time, the more likely you are to successfully lower credit card rates.
- Get a free copy of your credit report at Annualcreditreport.com. You can get one free report every twelve months from each of the three major credit bureaus, Experian, Equifax, and TransUnion. If you have been denied credit or have been the victim of identity theft, you can get a free credit report even if you've gotten a copy during the past year. To see your credit score you must pay a fee.
- Boost your savings. Take an honest look at where your money goes. It may be fun to blow wads of money on eating out, entertainment, or other impulse purchases, but is that the best use of your cash? Find ways to pay yourself before putting money toward discretionary items in order to build up that emergency fund.
- Review your retirement plan -- you do have one, don't you? Sign up for your company's 401(k) retirement plan or set up an IRA. Once you pay off credit card debt you should have more to put toward saving for the future.
This is just a suggested list of of tasks that can help improve your finances. Depending upon the situation you may need to set other financial goals, such as saving up for a house down payment or buying a vehicle. The more time you spend working toward financial goals, the less likely you are to get trapped in a cycle of relying on credit cards to finance your lifestyle.
Published 04/09/12 (Modified 11/21/13)