Taking a moment to really reflect on your full financial picture can give you newfound insight on how well you're managing money now. Plus, it can inspire you and leave you with clarity on what steps you can take to improve.
Here are six money questions that can help you dive deeper into your current financial situation and set goals for the future.
1. What's Working Well?
To start your money assessment off on the right foot, take a minute to reflect on what's working for you now. What financial decision or habit do you feel proud of? What makes you feel in control of your money, or optimistic about building financial stability in the future?
For example, you could be proud of paying off a credit card balance or starting a new job. Or, you could feel motivated by something as simple as installing a budgeting app on your phone, setting up direct deposit or staying current on your auto loan payments.
Take note of what's working for you now, and use it as an affirmation as you consider the financial life you want to build. You could even try jotting it down and putting it somewhere you'll see often, such as on your bathroom mirror. Reading "I'm getting closer to being out of debt every month" or "I can pay my bills on time" every morning sets the stage for more and more wins down the line.
2. Am I Prioritizing Saving?
When you get paid, how do you prioritize where your money will go? Do you have a plan for how you'll afford your expenses, set aside money for saving and leave some for discretionary spending?
Depending on your current money routine, it may be time to rethink the way you allocate funds to your needs, wants and savings. If you aren't already, start by paying yourself first. In other words, set up automatic transfers into a high-yield savings account each payday.
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How much you should aim to save comes down to your personal financial situation and goals. Many people use the 50/30/20 budget rule as a guide. With this spending plan, you direct half your income toward essentials like housing, bills and basic groceries; 20% of your income goes towards saving and debt; and the remaining 30% is your fun money, which goes toward everything else.
3. Am I Prepared for an Emergency?
If you were hit with a large, unexpected expense, what would be the fallout on your finances? Could you afford a $1,000 vehicle repair or medical bill? What about a temporary reduction in income?
These scenarios aren't fun to think about, but gauging your preparedness for rainy days while the sun's still shining is key to building financial resilience. That's why creating an emergency fund is foundational to increasing your financial stability. Learn about how to calculate the right amount to put in your emergency fund and how you can build your emergency savings faster.
4. What's My Strategy for Paying Off Debt?
If you're currently carrying debt, you're far from alone. Including mortgages, Americans had an average overall debt balance of $101,915 in 2022, according to Experian data. Mortgages, student loans and auto loans were the biggest contributors to consumer debt.
Credit cards often come with high interest rates, so if you're carrying balances, make a plan for how you'll pay them off. Consider debt payoff strategies like the debt snowball method or the debt avalanche method, which take different approaches to targeting one balance at a time.
5. Am I Planning for Retirement?
Retirement may feel far off, especially if you're still a student or are in your twenties or thirties. But the best time to start planning for retirement is right now. If you aren't already, learn about how to start setting aside money for retirement through a workplace 401(k) or an individual retirement account (IRA).
You can start by setting your own goals and automatically contributing a percentage of your paycheck toward retirement each pay period. If you want to create a more in-depth plan, you could work with a financial advisor to get an expert's advice on building the retirement you want.
6. How's My Credit?
Do you know your credit score? Your credit determines whether you're able to borrow money and how much it will cost using an array of credit products, including credit cards, mortgages, auto loans and personal loans. And a higher credit score can help you access premium credit products, such as cash back rewards credit cards.
Regardless of whether you have the desire to borrow now, getting your credit in good shape can give you leverage if you need to borrow down the line. To see where you stand, check your credit score for free through Experian.
The Bottom Line
Making financial strides can be a forward-thinking process, but reflecting on what's working (or isn't working) for you now can help you make progress toward your goals. In addition to gauging your money management, consider signing up for free credit monitoring through Experian to keep tabs on your credit over time.
Within your free Experian membership, you'll also have access to a money tracking tool that shows you how much you're spending each month compared with your income. That can help you watch how you're improving your finances long term.
