In a previous article, we discussed financial tasks to do every day and every week to help organize and keep track of your money. Once you gain control on a daily and weekly basis, it’s time to look at tasks to complete each month.
- review spending
- look ahead
- identify areas where you can cut back
- take a look at your savings picture
- work on paying down debt – especially credit card debt
- forget out-of-the-ordinary expenses
- overlook automatic payment options
- consider savings as an option
- skip participating in a retirement plan
- ignore substantial debt
If you have been keeping receipts, and documenting spending into categories such as “household expenses,” “mortgage/rent,” “groceries,” “snacks,” “dining out,” etc., you now can review what you spent during the month to identify any trends or expenses you did not anticipate. Many people are surprised to find how much they have spent on lunches, extra items at the grocery store or other expenses.
Take time to review your income and planned expenditures for the coming month. You should be able to make a more accurate spending plan based on your actual finances from the previous month.
Over the course of a month, you’ll notice, per above, trends, and areas where you spend more or less than you anticipated. Now you can go to the next step and look for expenses you can cut. It could be the daily coffee at the coffee shop, your cable bill or something larger.
Are you on track for your annual savings goal? Have you included savings for holidays, birthdays and vacations? Each month, make sure your spending is on track with your budget and your goals.
Prioritize debts, placing secured debts (mortgage, car) first on the list. Then decide on a fixed monthly amount you can allocate toward paying off your credit card and other unsecured debt. This figure should be more than the combined minimum payments on all of your credit cards. From there, choose either the avalanche or snowball method to pay down debt. Evaluate where you are each month and make sure to do what is necessary to keep paying it down.
As you plan ahead for the next month’s spending, remember to account for expenses that don’t occur every month. These could range from birthday gifts to a car licensing fee. If you need to, adjust your planned discretionary spending to cover these costs, or make a plan for how you will handle them.
Consider setting up automatic payment for monthly bills such as phone, utility or rent. Online bill payment or automatic deduction can help avoid late payments. Some lenders and utility companies even provide a reduced interest rate or other rebate for using the service.
Remember that saving is a mandatory “bill.” Some financial institutions let you set up automatic transfers from your checking account to a savings account. Many employers will automatically deposit a portion of your paycheck into a savings account if you so choose. Record savings like a bill every month.
Make sure you have a retirement plan set up and are contributing to it regularly. If your employer matches contributions, take advantage. If you are on your own for retirement savings, invest in an Individual IRA, Roth IRA, and/or plan for self-employed persons.
If you are struggling to pay down debt, make the decision to do something about it. If you have had a true temporary hardship (such as having lost a job, but now have one and are able to pay bills again), you can try to contact creditors and ask for temporary hardship status. Some may work out payment plans. If you are in need of lower interest rates to pay off your credit card debt, credit counseling may be of help. If you are struggling to make required minimum payments, consider debt negotiation (settlement). Regulated by the Federal Trade Commission, debt negotiation companies work on a consumer’s behalf to lower the principal debt balances they owe. For people who otherwise would need to consider credit counseling or bankruptcy, can be very effective.
Getting in the habit of evaluating your finances each month will help you avoid overspending, help avoid going into debt, and move you forward to a better financial future.