Have you ever been to the dentist and been told you have a cavity? No one likes getting bad news, and being told to cut back on sugar intake, floss more, and improve your overall dental health can be a hard pill to swallow… But it’s important to take an honest and objective look at what you could do better — making small changes can have lifelong positive results.
The same things can be said of your financial health. Think about it: The routine check-up exercise of analyzing your personal finances may conjure up some difficult emotions. Perhaps you already suspect that you’re spending too much money on your daily Starbucks or trips to Target, but you just don’t want to have to face these issues head-on. (Ignorance is bliss, right?) Thankfully, it can be relatively painless to identify your small financial “cavities” that need work, and get back on a budget that can help get you to a healthier place, ASAP. Here’s how to identity what might be falling through the cracks of your everyday finances and get your spending habits back on track:
Track Your Expenses
Gather as much information on your current and past spending habits as you possibly can. This is easier than you may think — take a look through your recent bank and credit card statements, or even pull out your checkbook, if you’re a check-writer. Put all your spending transactions into a spreadsheet and categorize them. For example, you might have “dining out,” “clothing shopping,” “food shopping,” “entertainment,” and more. Go with whatever makes sense to you. And if a DIY spreadsheet isn’t your thing, there are countless budgeting apps that come highly recommended. Mint and YNAB (You Need A Budget) are two HerMoney fan favorites! At first, this may be a little tedious, but the more information you can document and categorize, the better you’ll understand the overall picture of where your money is going. You’ll be amazed to see how much you’re spending on one-off treats, and how it can really add up and impact your overall financial picture. You may quickly realize how you’re missing an opportunity to invest that money elsewhere, or pay down credit card balances.
Hunt Down Forgotten Subscriptions
These days, apps and other streaming services make it really easy to sign up for what’s initially a “free trial,” but then quickly becomes a recurring (and often expensive) monthly subscription. We’ve all fallen prey to the “first 30 days free” trick, so don’t feel bad. The important thing is that you take a look at your monthly subscriptions every few months or so and make sure that these services are still valuable to you. If you’re worried you might forget to check, set up a calendar reminder for the day before your free trial is due to expire.
Get Your Credit Card Debt Under Control
Consumer debt is at an all-time high. And while many people are still healing from financial losses due to the Covid pandemic, and may not be able to pay more than the minimum amount due each month, it’s important that you try to pay off your credit card balances as quickly as possible, due to the (often exorbitant) cost of debt. Some credit cards charge more than 25% interest — think of what you could do with that money every year! There are a number of different ways to tackle paying off credit card debt whether it be the snowball method (paying off cards with the lowest balance first) or the avalanche method (prioritizing paying off cards with the highest interest rate first). No strategy is wrong — the goal is that you find the one that works best for you! It takes diligence and dedication to pay off credit cards, but as long as you stick with it, you can be debt free before you know it.
A financial check-up should be something that you do regularly, so that you can check in on your goals and make sure you’re staying on track. You got this!
MORE ON HERMONEY:
- 3 Financial Planning Lessons From the COVID-19 Pandemic
- 5 Strategies to Start Repaying Your Student Loans and Become Debt Free
- 5 Shrewd Secrets from Women Who’ve Fixed Credit, Paid Debt, and Made Fortunes
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