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It may sound scary at first, but doing a regular budget check-up can be both easy and extremely beneficial. We want to give you four simple ways you can review your numbers to conduct your own budget check-up. You’ll take a look at your debt, emergency savings, net worth, and discretionary spending.
No one likes debt, but the best way to control it is to have a plan. Make a list of all your outstanding debt (credit cards, auto loans, student loans, etc.). Next, create a repayment plan. Rank your debts in the order you want to pay them off. Some experts suggest ranking them from smallest to largest so you can build momentum as you go. Then find areas where you can adjust your budget to pay off those debts (ex. taking money away from entertainment). Click here for a simple debt worksheet to help you get started!
2. Emergency Savings
Next, it’s time to make sure you have an emergency savings. Most experts believe you should have 3 to 6 months worth of living expenses in your emergency fund. So, how can you grow an emergency fund? Come up with a monthly savings goal and make saving part of your regular budget. You can also set up automatic transfers from your checking account to your savings account every time you get paid. For free savings calculators, click here.
3. Net Worth
Monitoring your net worth is another way to see if you’re on the right track with your finances. Your net worth is the value of all of your assets, minus all of your liabilities or debts. Essentially, you always want to see your net worth increase. For an easy net worth worksheet, click here.
4. Extra Spending
On to discretionary spending. This is the fun one…and the one that gets most people into trouble! Many times the budget we set for ourselves doesn’t work because we allow too many impulse purchases. Look for areas to minimize spending so you can stay on track. If you need to, use cash envelopes for accountability (ex. put a specific amount of cash in an envelope for dining out for the month). If you don’t already have a budget, click here for a free budget worksheet to get started.
For more tips for your budget check-up, watch this!
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©2017 FORUM Credit Union