Finance & Career
People often pay close attention to their physical health, but do they ever evaluate their financial health? Routinely evaluating finances will help a person keep their financial issues to a minimum. Having these types of issues can often add stress to a person’s life. If someone finds that their financial shape is not what it should be, they should start making adjustments to become more financially fit.
If a person has money management problems or concerns, they should tackle them without delay. Neglecting these problems will only allow them to become bigger and more complicated. To assess their finances, people should ask themselves if they
- usually spend more than what they earn?
- need to use credit cards or loans every month in order to make ends meet?
- spend their money based on priorities or as they go day by day?
If someone answers yes to one or more of these questions, their finances need immediate attention.
Create a Spending Plan
Changes are necessary to get finances in better shape. People often see a nutritionist or a doctor to develop a plan to get in better physical health. The same approach should be taken when attempting to become financially fit.
Developing a spending plan allows people to know how much money they have, where the money is going, and where it should be going. Expenses are different in each household, but most people have certain similar fixed and flexible expenses. Mortgage or rent, insurance, and a car payment are examples of fixed expenses. On the other hand, flexible expenses could be utilities, food, and gas.
If a person creates a spending plan, they can lay out all of their expenses and determine if their income will cover those expenses or not. A spending plan will also help people prioritize needs versus wants. For example, buying groceries is a need, whereas purchasing a new set of rims for a vehicle may be a want.
After creating a spending plan, people can use the budget as a guide to become financially fit. Having a budget in place will help reduce a person’s debts and meet their short-term and long-term financial goals. To create a budget people can use a notebook, a computer app, or computer software to help keep track of income and expenses.
The last thing people want to do is rely on credit or quick loans to solve their money issues on a regular basis. Ideally, people should try to save money for unexpected or planned expenses.
It is not too late for people to get in the habit of monitoring their finances a little closer and becoming more accountable. A person is in good financial shape when they can stay within budget, reduce debt, and meet their financial goals.
Contact Dorothy Brandon, an Alabama Extension personal finance management specialist, at 256-372-5458 for more information on financial management. You can also visit www.aces.edu or contact your county Extension office for more financial resources.