OK, I have to admit that when I originally planned to write this post (back in March, I’m a planner 🙂), I wasn’t expecting so many people to lose their jobs or be furloughed from their place of employment temporarily due to a global pandemic. But here we are. Whether you were affected financially or not, we’re already five months and counting into 2020, so it’s time to check-in. Here is my recommended checklist of things to take a good look at, and things to start planning for.
1. Your spending habits
If you’re not using a system like QuickBooks or Xero, a good old-fashioned spreadsheet will do. One of the most common money mistakes people make is using the “ignorance is bliss” mentality. Part of being financially healthy is being very on top of what you’re spending your money on each week. I highly recommend once you get this big chunk out of the way that you make this a weekly task. Categorize what you’ve spent your money on the past five months. Break it down into the following categories:
- Essentials (rent, utilities, groceries, insurance)
- Meals + entertainment (ordering from restaurants, downloading a movie, your daily iced coffee from Starbucks)
- Styling expenses (clothing purchases, home décor purchases, etc.)
- Self-care expenses (skincare, yoga classes, etc.)
- Recurring subscriptions
From here, you’ll have a good idea of where the majority of your paycheck is going. If any of the numbers surprise you, break it down even more. Was your self-care expense list off the charts? Maybe you didn’t realize how much you were spending on pricey lash extensions every three weeks. It all adds up quickly. Having an excellent aerial view of your spending habits thus far helps you see where you can make changes.
2. Replenish your emergency fund
I know this is difficult for many people right now, but once you find yourself in a more comfortable financial position, it’s time to build that emergency fund back up. Make small weekly contributions until that cushion starts to grow. Ideally, you want to have three to six months worth of expenses squirreled away.
A pro tip: Ideally, your emergency fund should be housed in a separate place than your main bank account. That way, you’ll be less tempted to tap into it without good reason. Plus, you can figure out how much you exactly have at a single glance.
3. Check your credit health
Check your credit health by ordering a credit report. You’re entitled to a free report from each of the three major consumer credit bureaus—Experian, TransUnion, and Equifax—during a 12-month period. All you need to do is order one from AnnualCreditReport.com. FYI, that’s just for your credit report. If you want to access your actual credit score, an additional charge might apply. But most banks and credit card networks can also tell you your credit score for free, but their scoring models may be marginally different than the FICO one.
4. Check-in on your retirement contributions
Ideally, you should aim to max out your tax-favored retirement plans, such as a 401(k) plan, 403(b) or IRA. It not only helps to build your future nest egg but also potentially yields a valuable current-year tax deduction. If you don’t have the financial means to meet the max, I suggest looking for ways to reduce your current expenses. You can also potentially allocate any bonuses or raises you get going forward to your retirement fund. Another good option is to consider increasing your contributions gradually by one percent of your salary per year until you reach your desired goal.
5. Negotiate fees
Negotiating your bills—from your credit card company to your internet plan—can help you save money and reduce your monthly spending. The easiest one is to try calling credit card companies and negotiating your interest rate down if you have credit card balances. Many people don’t realize that they can often negotiate interest rates when trying to tackle their debt. You can also use online services like BillCutterz and Truebill to negotiate prices for monthly bills like cable and internet for you.
6. Double-check your withholdings
Look at the last W-4 you filled out and double-check your federal allowances. The more allowances you claim, the less withholding you’ll have, and you want to make sure you are withholding enough to avoid any penalties. If you’re a freelancer, a contractor, or are self-employed, and you make quarterly tax payments, figure out how much more you will need to pay for 2020 early on. Taxes shouldn’t come as a surprise, so understanding what you owe and what you are expected to owe is very important as you approach the remainder of the year.