At least once a year, it’s a good idea to take a good, hard look at your finances and figure out what areas could use improvement. Almost everyone has some financial issue or other to deal with, and rather than putting it off and losing money, it’s best to sit with your accounts and get it over with. The sooner you get real with yourself and take action, the sooner you can start saving more money. Indeed, you might even start making money!
Table of Contents
1. Insurance Rates
One of the trickiest financial issues to deal with is insurance. After all, insurance is one of those expenses that doesn’t feel necessary … until you need it. You may feel like insurance is a waste of money in some areas, and it can be. In contrast, other insurance is essential to your health, wealth, and overall well-being. Sitting down to know the difference and find providers that won’t price gouge you, is a critical financial step.
For some items, insurance seems silly — an old, outdated cell phone, for example. However, large investments like a home or expensive vehicle and essential medical and dental services warrant good insurance that will save you from having to pay a huge deductible in the event of a disaster or emergency. Your best bet is to call around to compare prices to ensure you’re getting the best deal. This means getting a home insurance quote (or four) and comparing options for vehicles and your medical and dental plans.
2. Monthly Utility (and Other) Bills
More often than not, people don’t bother shopping or haggling for their utility services or other monthly bills. You probably figure you’re already getting the same rate as your neighbors or peers, and you’re likely not paying too much money. So, you leave it alone and pay the monthly bill, but the truth is you may be overpaying on multiple monthly bills. Even $10 or 20 dollars on each bill can add up to hundreds of dollars each year.
Wouldn’t you rather keep that money? With utility bills, if there’s no competition in your area — like with power or garbage — call the company and ask about ways to save and cut your bill. For other services — like your cell phone or streaming apps — look for better deals with competitors, and let your current provider know you may be leaving. In most cases, customer service agents will find ways to keep you by saving you money.
3. Savings vs. Investments
It can be challenging to figure out how to save money if you’re living paycheck to paycheck, or close to it. Keeping a savings account is important so that if the unexpected happens you don’t have to go into debt, or worse, lose what you have. For this reason, you should be looking at your finances for places to save money, like those provided above. And when you do get a little money, you should consider ways to invest and make money rather than “just” saving.
Even if you start small, with $100 or so, you can put your money into an interest-bearing account. Far too many people still have their money, sometimes tens of thousands of dollars, in a low-interest savings account with their bank. At the very least, find the savings account with the highest possible interest. From there, you can start figuring out how to get your money to earn even more for you with small index funds or money market accounts.
4. Good Debt vs. Bad Debt
Sometimes, when people talk about debt, they lump all debt into the same bucket — bad. And, of course, a lot of debt is bad. Typically credit cards are considered bad debt, car loans can be bad debt, and unsecured private loans with high interest rates are bad debt. These types of debt cost you money not only on the loan but also on the interest you pay to have the loan. In financial health terms, it’s usually not worth it to borrow (and lose) money for “things.”
Good debt is debt that makes you money. A mortgage is the most obvious example in this scenario. In most cases, the value of the home will be more than it was when you first bought it, and the money you pay for the loan, including the interest, will potentially all come back to you, and then some. Another example would be a credit card that gives you points or money back, as long as you pay it off each month and don’t incur interest charges.
5. Income
Finally, one big area to re-evaluate in your finances is your income. While many people figure their income is what it is and that it can’t be changed, that is not always true. Many jobs have room for growth and allowances for increases in pay. The problem is that people, especially women, are afraid to ask for more money. This fear ensures your income will stay lower than it could be, and that your company will keep that money and potentially give it to someone else.
So, first of all, get comfortable asking for more money. Talk to your HR department about the top level of income for your position, and ask about opportunities for growth (and increased income). Also, don’t be afraid to shop the competition; your company’s competitors may offer a better salary with better benefits. Finally, consider a side hustle; look for jobs you can do online or on weekends that can earn you a tidy income to start saving and investing.
You deserve a healthy financial picture you can feel good about, and re-evaluating your finances once or twice a year can help you get that picture. Remember that it doesn’t have to be all at once. Building from a poor financial situation to a positive one can take months or years. Start small and take one step at a time, and you can watch your wealth grow. Before you know it, you’ll be telling others about the importance of re-evaluating their finances!
