Worried you’re mismanaging your money? Try this 7-step financial review

As kids and teens get ready to “go back to school,” now is the time for adults to go “back to square one” when it comes to their finances. Get yourself a financial checkup. Look at the current state of your finances and find out what you need to do to get (or stay) on track so you can reach your financial goals.

How are you spending, borrowing, saving, investing and protecting your money? What changes should you make now to help deal with the impact of rising prices, higher interest rates and financial market volatility on your portfolio and investments?

1. Find your personal inflation rate. First, you should find out how inflation and rising rates impact your budget.

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Even though inflation is at a 40-year high, we don’t all spend the same amount of money on the same things. Collect bills and bank statements to see what you’ve spent on food, housing, gas, entertainment, clothing, education and other items over the past 12 months. Then calculate your own personal inflation rate by doing this:

Add up your monthly spending last month and what you spent on the same goods and services a year ago. Subtract your total spending for July 2021 from July 2022. Divide this difference by your monthly spending for July 2021. The result of this equation is your personal inflation rate.

Whether your actual number is more or less than the latest government inflation rate is not the point. You need to review your expenses to see what you are spending and what you can reduce, reduce or negotiate for a lower price.

Become a wiser spender

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Once you’ve calculated your personal inflation rate, it’s time to be more frugal with your spending.

2. Avoid the “stimulus of life.” You may have gotten a slight raise or moved to a new job making more money. So why not treat yourself to takeaway most nights of the week? You are working so much that you don’t have time to cook. If these meals and delivery costs have doubled your food costs, but your take-home pay hasn’t kept pace, you may be the victim of a “lifestyle stimulus” as the cost of your lifestyle life increases faster than your income. See what expenses you can reduce or reduce, such as memberships, subscriptions or even travel.

3. Use only one credit card. Get organized to better manage what you spend. Having all your transactions in one place will make it easier to better track your spending. Have a credit card in your wallet to spend in-store or use for online purchases. If you use a digital wallet (Apple Pay or Google Wallet), use that same card for everything you buy.

4. Set limits and alerts on cards. The limit for purchases with a debit card can vary from a couple of hundred to a couple of thousand dollars per day. The bank usually sets this limit, but you can ask for a lower limit if you think it will help you control your spending. Some credit cards will also allow you to set your own spending limits. You can also sign up for alerts (email, text, push notification) to let you know when you’ve made a purchase over a certain amount.

Keep saving and investing

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Limiting your spending can be smart with rising prices and higher costs of basic goods and services. How should you deal with the uncertainty of the economy and your investments?

5. Have a mix of stocks, bonds and cash. You should have a mix of stocks, bonds and cash. An adequate emergency fund in cash reserves to cover living expenses is essential. Start by trying to store at least three months. You should also have a mix of stocks and bonds (mutual funds and/or exchange-traded funds) to ensure your long-term savings keep up with inflation.

You need the right mix for the amount of risk you’re willing to take and the amount of risk you need to take so that your money can grow and you can afford to live comfortably in the future. Consider a target-date fund that invests in a mix of stocks and bonds and automatically rebalances toward less risky investments as you get closer to your retirement or other “target” date.

6. Check out online investment tools. You can check out online investment tools offered by major brokerage firms as well as non-profit organizations to help you understand some of the basics of investing. Also, talk to a representative of your employer’s retirement plan (if one is offered) to learn more about how you can take full advantage of the investments offered at your workplace.

7. Work with a financial advisor. A financial planner can help you set up a strategy that is able to withstand market volatility and still meet your goals by dividing your money between different types of assets.

Find a certified financial planner in your area by going to CFP Board, Financial Planning Associationi National Association of Personal Financial Advisors web sites Your first meeting should be free. Talk to a few advisors to find one you trust fits your needs.


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About the Author: Chaz Cutler

My name is Chasity. I love to follow the stock market and financial news!