The better you manage your money, the more likely you are to have healthy savings and a reasonable amount of debt (as opposed to an unhealthy level). But if you’re not careful, you could end up with a series of dangerously high credit card balances and a world of financial stress. Here are some signs that you’re not doing the best job of managing your money – and what to do about it.
1. You don’t know how much your bills are costing you
You could think you spend $ 300 a month on groceries, but what if you look at your bank and credit card statements from last year and find that for most months your total tab is closer to $ 400 ? Would that shock you? If you don’t know how much your various expenses are costing you, you can’t accurately manage your paychecks. And that’s a problem.
The solution? Get yourself on a budget. List your monthly expenses (using specific numbers you get by going through those bank and credit card statements) on a spreadsheet or find a budgeting app you like. Then check your budget each month to make sure you’re following it. If you find that you need more space to spend in specific categories, you will need to reduce others to allow this. But it’s a much better solution than continuing to ignore the true cost of your bills.
2. You live from paycheck to paycheck
It’s not uncommon to find that you can’t pay your bills, including unforeseen ones, until your next paycheck hits your checking account. But that’s not a healthy way to exist. There is a high risk that you will incur debt if an invoice is higher than expected or if unforeseen expenses, such as car repairs, arise unexpectedly.
The solution? Create an emergency fund. Ideally, you should have enough money in savings to cover three to six months of living expenses. If it’s not doable in the short term because you don’t have money in the bank, at least save Something. Carry enough cash to cover a month’s worth of bills or to pay a surprise expense of $ 500. Then focus on your way from there.
3. You are regularly late with your invoices
Paying your late bills could seriously damage your credit score, as your payment history is the most important factor that goes into calculating this number. You will also be spending money on fees and charges unnecessarily if you are behind on your payments.
The solution? First, use this budget to make sure you have the funds to pay your bills. Then automate your payments. Many billers will allow you to set up automatic payments so you don’t risk forgetting to issue a check or make a payment online. It’s an easy way to avoid a headache.
If your money management skills could use a little work, fear not. A modest effort on your part could put you on the right track and help improve your overall financial situation. Also remember that improving money management is a work in progress. The more effort you put in, the more likely these skills are to develop.