August is the Perfect Month to Assess Your Finances
So back in January, you decided that this would be the year you finally got your finances in order: you’d pay off all of your credit card debt (or at least you’d avoid acquiring any new debt). You’d build up an emergency fund. You’d put a thousand bucks into your retirement account. You’d write a budget and this year – seriously – you’d stick to it.
And you did stick to it, too – for a few months. Then, somewhere around March, you started to slip into old habits. You stopped tracking your spending and you lost sight of some of your original New Year’s goals.
But no worries – even if your finances have gotten a little disorganized in the past few months, a quick money checkup can help you get back on track. August is a good time to do this – it’s about halfway through the year, and it’ll give you a good game plan as your household gears up for fall.
Not sure where to start? Here are five easy ways to get your finances in order this month:
1. Track your spending for about a month. The first step to finding possible problem areas in your budget is to find out exactly where your money is going. And the only way to really know that is to keep track of your spending. Every penny of it – even small cash purchases. At the end of 30 days, sit down and add everything up by category: How much did you spend on transportation? Bills? Groceries? Dining out? Entertainment? You should also look at how much you’re saving every month. This will make it easy to see which areas might need some work. And this leads us to the next step . . .
2. Review your budget. Once you’ve tracked your spending, it’s time to take a look at your budget to see how it compares to what you’re actually spending. Maybe you underestimated how much your household spent on food every month – or maybe you forgot to leave room in your budget for fun stuff, like the occasional movie. Good budgets often begin with a bit of trial and error, so don’t feel bad if you find that you need to make some changes. Of course, if you don’t have a budget, now is the time to make one. Sit down with your household spending information and decide how much you heed every month for food, housing, bills, savings, and spending money. (For a few easy ways to get started, check out this post or this one.)
3. Assess your savings goals. Everyone should have some sort of financial goal to work toward, such as paying down credit card debt, building up a respectable emergency fund, or putting money aside for a down payment on a house. If you’ve already set a goal, take time to review your progress. If you find that your progress has stalled, come up with a plan for getting back on track. One great solution? Set up an automatic bank transfer – that way, you don’t even have to remember to set money aside each month. Most banks offer this service for free. And if you don’t have a savings goal? Set one.
4. Update your W-4. If you’ve made any big life changes in the past several months (gotten married, gotten divorced, added a child to the family, etc.), you might need to fill out a new W-4 form. Not sure? Check out the IRS’ tax withholding calculator here to find out if you need to make a change.
5. Check your credit. According to the Fair Credit Reporting Act (FCRA), you are entitled to receive a free credit report once a year from the three major credit reporting agencies Equifax, Experian, and TransUnion. If it’s been a while since you’ve looked at your credit report, this is a great time to do it. Review your credit report for errors, and also look for things you can do to potentially improve your overall score: If you have any past due accounts, work on getting them back in good standing. If your cards are nearly maxed-out, work on paying down your balances. To find out more about getting a free credit report, visit annualcreditreport.com.
That’s it – five easy ways to make sure your finances are in order as summer draws to a close. What do you think? Do you have any suggestions? Have you made any big changes or set any new goals after assessing your finances? I’d love to hear about them!