If your money is on autopilot, you may be close to driving off the cliff! Learn how to take back the wheel.
Does it seem like you are running into the same money worries over and over again?
If you are nodding your head, you are not alone. Our lives are fuller than ever, and most of us approach our finances with a “set it and forget it” attitude. If you happen to have “set it” the right way, you might get lucky for a number of years. If your early settings were off – or if your life has since changed – then you may be driving to a destination you won’t like, or even straight off the cliff.
How do you take back the wheel?
First, decide on what matters.
Values and goals might seem like an unusual place to start the conversation about money. However, it’s the only way to make sure that anything you build from this point forward aligns with what matters to you. Spend some time thinking about what you want your money to do for you and your family. Beyond getting your basics covered (roof over your head, sustenance-level food, etc.), where should your money go? Some people want to save up a starter capital to launch a business, others hope to build a healthy retirement account that would allow them to live comfortably and travel. There is no wrong answer, just be sure to find the one that’s right for you.
Get a budget.
Getting to your destination of choice means that you must navigate there. Excuses along the lines of “I can do my budget in my head” and “Tracking my expenses is unnecessary” are no different than saying that you will just get in the car, start driving with no map and no directions, and hope that you will find yourself in San Francisco in a week. If you want to take charge of getting where you want to go, you must begin by assessing where you are, building a map (a budget) and following it diligently. It does not mean that you must stick to those directions in a rigid way, but major detours are likely to, well, detour you.
Look closely at your use of credit cards.
For many people, credit card usage is the ultimate litmus test for the reasonableness of their lifestyle choices. If you are resorting to those pieces of plastic as your “slush fund” for expenses that cannot be covered by the money you bring in, then you may need to reassess your lifestyle. Credit cards are meant for building up credit history and for serving as a safety net if you have an unexpected large expense. If your “unexpected large expense” is a pair of designer shoes every month, get those shoes into the budget – or face the fact that they are not in the budget right now.
Check your 401(k) or other pension plan contributions.
Many people set up their 401(k) contributions when they begin their employment and don’t think about them again until they leave that job. As a result, your contributions may well be stuck in the last decade (or even last century). The best thing to do is re-assess the contributions you are eligible for annually, get as close to maximum as you can (given that your immediate needs are covered), and take advantage of employer matching.
Check your insurance
Insurance decisions require a lot of research, much paperwork and more than one phone call. I cannot blame you for not wanting to do it any more frequently than you have to. However, if you have not looked at your insurance coverage in a few years, one of two things could be happening without your knowledge. First, you could be under-insured for your current needs. Second, there could be better value policies available. So, take the time to re-evaluate and take action.
Taking your finances off autopilot
One common thread through all five recommendations above is that they require you to stop what you are doing, pay attention and get involved. That takes time, so my last bit of advice is to schedule regular time dedicated to your money matters. It does not have to take all day, but blocking off a half hour as a space to focus and invest in taking charge of your financial situation is priceless.
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