Worried you’re mismanaging money? Try this financial check in 7 steps

As kids and teens prepare to “back to school,” now is the time for adults to “go back to basics” when it comes to their finances. Treat yourself to a financial check. See where your finances are today and what you need to do to get – or stay – on track to reach your financial goals.

How do you spend, borrow, save, invest and protect your money? What changes should you make now to better manage the impact of rising prices, higher interest rates and volatile financial markets on your wallet and investments?

1. Find out your personal inflation rate. First, you should find out how inflation and rising interest rates are affecting your budget.

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Even with inflation at a 40-year high, we don’t all spend the same amount of money on the same things. Gather bills and statements to see how much you’ve spent on food, housing, gas, entertainment, clothing, education and more over the last 12 months. Then, Calculate your own personal inflation rate by doing the following:

  • Add up your monthly expenses for the last month and the expenses for the same goods and services a year ago.
  • Subtract your total expenses for July 2021 from July 2022.
  • Divide this difference by your monthly expenses for July 2021.
  • The result of this equation is your personal inflation rate.

Whether your actual figure is more or less than the government’s latest inflation rate isn’t the point. You should review your spending to see what you are spending and what you can cut, reduce or negotiate at a lower rate.

Become a savvy donor

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Once you’ve calculated your personal inflation rate, it’s time to be more economical with your spending.

2. Avoid “lifestyle creep”. You may have received a small raise or switched to a new job to make more money. So why not treat yourself to a grab and go most nights of the week? You work so hard you don’t have time to cook. If those dining and delivery expenses have doubled your dining expenses but your takeout payment hasn’t kept up, you could be a victim of lifestyle creep, as lifestyle expenses are increasing faster than your income. See which expenses you can reduce or eliminate, like memberships, subscriptions or even travel.

3. Use only one credit card. Get organized to better manage your spending. Having all your transactions in one place makes it easier to keep a better eye on your spending. Have a credit card in your wallet to swipe at the store or use for online purchases. If you use a digital wallet (Apple Pay or Google Wallet), use the same card for everything you buy.

4. Set card limits and warnings. The limit for purchases made with a debit card can vary from a few hundred to a few thousand dollars a day. The bank generally sets this limit, but you can ask for a lower limit if you feel it helps you control your spending. Some credit cards also allow you to set your own spending limits. You can also sign up for notifications (email, SMS, push notification) to let you know when you’ve made a purchase over a certain amount.

Keep saving and investing

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Limiting your spending can be wise with rising prices and higher costs for basic goods and services. How should you deal with the uncertainty of the economy and your investments?

5. Have a mix of stocks, bonds and cash. You should have a mix of stocks, bonds, and cash. Adequate emergency fund in cash reserves to cover living expenses is crucial. Start by trying to keep at least three months’ worth. You also need to have a mix of stocks and bonds (mutual funds and/or exchange-traded funds) to ensure your long-term savings keep up with inflation.

You need a mix that is appropriate to the amount of risk you are willing to take and the amount of risk you need to take so that your money can grow and you can afford to live comfortably in the future. Consider a target date fund that invests in a mix of stocks and bonds and automatically rebalances toward less risky investments as you get closer to retirement or another “target date.”

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