If you're on top of your regular income and outgo, then maybe you can safely skip this section. But if you're barely making it from payday to payday or have the distinct feeling that you're treading water while others swim merrily by, then here is where you'll find the means to get moving.
One thing you need to do is take a financial inventory. That means sorting out the money and other assets that are all yours from those that someone else has a claim on -- in other words, finding out what you own and what you owe. You add up the value of everything you own, then you subtract from it the total of all your debts. The result is your net worth.
First, though, it will be helpful to perform another little piece of self-analysis. Taking some time to record what you do with the money that passes through your hands on a day-to-day basis will pay off in valuable information about the state of your financial affairs. It's the first step in getting them under control.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
If you haven't been paying much attention to where your money goes, use our household budget worksheet. You'll have exact figures for some expenses -- mortgage or rent, for example, and insurance premiums -- and you can estimate others on a monthly basis. Go over your paychecks, bills and credit card statements. Hang on to cash-register receipts from stores, gas stations, and restaurants. The more actual expenditures you can pinpoint, the more you'll know about your spending habits when you're through.
No matter how this exercise comes out, you're going to be confronted with the evidence of your spending and forced to make some judgments about it. You'll find yourself in one of three situations.
Are income and expenditures roughly in balance? Making it from one year to the next without getting into a hole may be something of a feat these days, but before you start patting yourself on the back, check your totals again. How much did you put into savings compared with what you spent on recreation, gifts or clothing? Out-of-whack entries in those or other categories of discretionary spending could mean trouble's brewing. There's more to good money management than balancing the books. You have to balance your priorities, too.
Did you make more than you spent? This isn't necessarily a good sign, either. Because your cash-flow statement includes savings and investments, you shouldn't have any money left over. What may at first look like a surplus is probably just a failure to remember some spending. Go over the numbers again.
Did you spend more than you made? This is the clearest sign of trouble ahead. You've either been dipping into savings, borrowing money or buying on credit. You can get away with it for a while, and there are times when it's smart to borrow or when you have no choice. But as a regular practice, it's bad money management that will cost you in the long run.
Go over your cash-flow statement carefully, looking for places where your money might be dribbling away. You should begin to spot some ways to plug the leaks.
-
How to Measure the Health of Your Retirement PlanThese five key indicators can help you make decisions based on the overall performance of your retirement plan rather than individual variables.
-
Four Easy Ways to Get Yourself Fired
Being a standout on the job can sometimes be as simple as showing up to meetings on time, responding promptly to requests, doing your homework and not being a jerk.
-
More Signs of Belt-Tightening and a Slowing Economy: The Kiplinger Letter
The Kiplinger Letter Although fewer banks are tightening lending standards, more businesses and households are feeling the squeeze.
-
What Is Comprehensive Coverage and What Does It Cover?
insurance This grab bag of coverages can protect you and your vehicle from theft, fire and forces of nature.
-
Passport Processing Times Speed Up: The Kiplinger Letter
The Kiplinger Letter The State Department credits an increase in staff and new technology with shrinking processing times.
-
White House Aims to Limit Access to Short-Term Health Plans: The Kiplinger Letter
The Kiplinger Letter The Biden administration's draft rule would restore several Obama-era regulations.
-
What Is Liability Insurance and What Does It Cover?
insurance Liability insurance protects you if you injure someone else or damage their property with your car.
-
What Is Collision Insurance and What Does It Cover?
insurance Collision insurance is often optional, but there are many good reasons to include it in your policy.
-
Some Good News for Consumers on Heating Costs: The Kiplinger Letter
The Kiplinger Letter Most (but not all) heating costs should be cheaper this year compared to 2022.
-
U.S. Banks Closed 3,000 Branches Last Year: The Kiplinger Letter
The Kiplinger Letter Last year, 3,000 U.S. bank branches closed as lenders looked for ways to fight competition from fintech and digital banks and keep pace with technology.
