How to Manage Your Money Like a Propersonal finances | May 25, 2018 | By Susannah McQuitty
Whether talking money management freaks you out or hypes you up, start with the basics in order to successfully navigate your personal finances.
Managing anything starts with knowing what “anything” is, after all. You can’t manage your finances well if you don’t understand how much you’re spending, how much you’re making, how good your credit score is, or how to handle your taxes.
Today, we’re going to talk about becoming more financially aware in all these areas to kick-start your money management goals.
Get real about your spending habits
Let’s start with the most basic elements: what you make and what you spend. Some banks and credit card companies make this easy by tracking income and expenses to help you evaluate spending habits, savings goals, and so on. If you don’t have this feature, no worries—you can still do it by hand.
First, take note of all the income you earned last month (even from miscellaneous or one-time sources); then, review how you spent that money. How much went toward investments or savings? What about bills and necessities like rent, gas and groceries? How did you spend your discretionary income on non-essentials like movies, gourmet coffee, gym memberships and eating out?
Be as thorough as you can, and when necessary, make some educated guesses. It’s important to assign dollar amounts for the whole month if you want a good view of what’s coming in and what’s going out.
This whole process might be an eye-opener, but that’s okay; now that you have a breakdown of your saving habits, your necessary expenses and your discretionary income, you can set realistic financial goals and curb your spending to match.
Check credit reports
In the vein of keeping a hand on your financial pulse, checking your credit reports is a good call. There are three sites where you can access your credit reports: Experian, Equifax, and TransUnion. On each site, you’ll be allowed one report per year, so you can spread out your credit checks over the year.
Checking your credit report is great for understanding your financial situation, but it’s also important to check for potential fraud and incorrect information that may be skewing your overall report—a bad credit score can impact your ability to secure a mortgage for buying a home or obtain credit for other substantial purchases.
Review your tax situation
We talked a little about this a few weeks ago, but now really is the best time to look at your taxes and plan ahead. You can probably recall where you stashed your tax documents, and let’s be real—finding the right records is the most time-consuming part of the tax-filing process.
There’s also tax reform to think about this year. The Tax Cuts and Jobs Act is officially in effect, so if you haven’t reviewed how that will change your personal tax situation, now’s the perfect time. Check out our blog post where we translate tax reform into plain English.
Define your goals and check back in with yourself regularly
Now that you have a bird’s-eye view of how much money you’re making, where it’s going and how it’s being recorded, it’s time to set some goals.
Are you being too nonchalant with your discretionary income? Think about changing your spending habits or finding additional sources of income. Is your credit score lower than you’d hoped? Develop a plan of action to chip away at credit card balances and build your score back up to a level that won’t make lenders twitch.
And of course, if you’re looking to get your maximum tax refund next year, check out the major changes in the tax law to see how they affect you, and file your taxes with 1040.com next spring!