Money matters are definitely not everyone's forte. Many have difficulty accurately planning a budget, and others simply don't want to be bothered doing so, simply living day to day and month and month as best they can. An easy way to consider your financial resources and the steps you may need to take to improve them is to ask yourself a few simple questions.
1. Will one more expense break your wallet?
How would you be able to cope with an unexpected bill? Financial planning has to not only consider the expected, but also the unexpected. If you're not prepared for that auto repair bill or an urgent medical bill, your finances are not in good order. At the very least you should have a line of credit available for these types of emergencies, if not cash. While you may not want to take on an extra credit card, the yearly charge may be worth it to limit your potential risk, as long as you can avoid using that card for purposes other than the emergencies it's intended for.
2. If your paycheck got lost in the mail for a few days, how would survive?
This is similar to the above proposition, though this one takes into account your financial planning for planned events, not just unplanned ones. While it would not necessarily be poor planning that would lead to this situation, as the delay of your check would be out of your control, you should still not be in a position where you're desperately awaiting each new check every week or two weeks. You should always be at least a month ahead in your finances ideally, meaning your bills are fully paid and all other expenses are accounted for for the month, with the next month's pay not being needed for immediate use. Emergency funds are considered a critical part of financial planning, and can take care of these unexpected situations that pop up.
3. What does your credit report have to say about your finances?
Here's another easy way to gauge your financial health, and the way you've handled money in the past. If it's clean, you've done a great job. Maybe it's simply a product of not taking risks, but either way, not putting yourself in a poor position is a great job. If your credit report is poor, no matter the excuses or unexpected events that may have lead to it, you simply weren't prepared for the expenses you had. All you can do is learn from the past and consider the factors that influenced your inability to pay your bills and let that be your guide.
4. Is your savings account lonely?
Do you have a few lonely dollars in there collecting dust? Are you receiving the princely sum of a few pennies interest each month from your banking institution? As mentioned, you should have an emergency fund of at least one month's living expenses stashed away, ideally in a manner that is working to earn you even more money, no matter how little. As long as that money can be accessed quickly in case of emergency, it's fair game on how you want make use of it. But, do not pick a rewards card to use as your emergency fund.
If your answers weren't positive for any of some or any of these questions, you may need to do a better job of organizing your finances in the future. No matter your income, there are always ways to cut expenses and lead a safer financial existence, it's just a matter of wanting it enough to go make it happen.
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