Did you know that there are certain techniques that should be used when gauging your financial preparedness? Asking yourself certain questions and answering honestly can allow you to determine if you are making the most of your financial future.
Do You Earn More than You Spend?
Earning more than you spend is an essential way to tell if you are on the right track for your future finances. It is important to make more than you earn to prepare for emergencies and ensure that you can be in control of your finances. Earning an income that exceeds the expenses is a way to tell that you are on the right track and spending below your means. This will ensure financial success.
Do You Pay Your Bills on Time?
Paying your bills on time is not only essential as it can contribute positively to the credit report but it can also create financial habits that act positively and prepare you for the future. Late payments can contribute negatively to the credit report information and should be avoided.
Healthy financial habits such as repaying bills on time through the month can help to control and secure the finances for the future as well as helping the consumer to avoid late fees and penalties that are associated with late payments to debts.
Do You Have a Controlled Amount of Debt?
A controlled amount of debt within the finances is okay – so long as you are able to maintain the debt repayment schedule. Having too much debt can lead to losing control within the finances and leaves the consumer liable to out of control minimum payments and increasing interest rates. Debt should be avoided unless you are able to repay the debt within a short period of time.
Taking advantage of buy now and pay later plans can be beneficial to the consumer as they acquire no interest, but they can also lead to debt when the consumer does not save the money to repay the amount that is owed when the term is complete.
Have You Established an Emergency Fund?
An emergency fund is different from a savings account as it can help prepare the family for any expenses that may occur if one of the income earners in the family becomes ill and is unable to work or one of the members of the family loses their income due to loss of employment.
These are all great ways to establish the health of your personal finances. The importance of preparing for the future can only be emphasized through the process of determining the health of your personal finances.