7 Ways To Check If You’re Financially On Track
For people 30+
You made it out of your twenties decades or years ago. Life has officially started for you (just kidding). But once you’re out of your twenties, it’s the perfect opportunity to conduct a financial exam to learn if you’re on track with your financial goals.
The 7 Item Checklist
1 . Multiple Income Sources
If you still don’t have more than one income source, it’s time to go and create one today. Having one income source is like betting all your life savings on one sick horse. Even if your income source is 99.99% reliable, there’s still a chance it might fail you.
Add at least one more source of income so that you can have diversified income and avoid putting all of your eggs in one basket.
2. One Year Emergency Fund
A three-month to a six-month emergency fund is a nice start, but to really stand the test of time, a one-year emergency is always more durable when unexpected things happen.
Two-year emergency funds are healthier for people who own a home. Mortgages can take you out financially if you aren’t prepared.
3. Positive Net Worth
Most people have negative net worths. It’s the standard trend. But it’s okay to be different.
You can still have a positive net worth if you carry debt. It’s actually okay to carry debt if you can pay it off at a moment’s notice. You don’t need to have enough cash to pay off your home, but that would be phenomenal, right?
Let me give you an example of a debt that might not make sense to pay off with a quickness: A student loan that is in forbearance and does not accrue any interest.
Even when these student loans aren’t in forbearance, they often have such low-interest rates that it might not make the most sense to throw away money paying it off. It usually makes more sense to invest that money.
4. Credit Card Debt
There is likely one kind of debt you usually don’t want to carry: credit card debt because of the astronomical interest rates. Some people carry balances month to month without it hurting them, but if you’re going to carry debt, this is usually the big one to avoid.
5. Car Notes
Having a car note is not the end of the world, but the question is, can you afford to pay your car off in cash? You should be able to. You should never buy a car that you can’t afford to pay cash for or that negatively impacts your budget to the point you’re financially strained.
Too many people have car notes that are upwards of $600-$1500 a month; this is excessive and often unaffordable for the average person.
6. Excellent Credit
As Dave Ramsey recommends, credit ratings are irrelevant if you live an all-cash lifestyle. But establishing excellent credit has its perks — especially when you want to finance part of your mortgage or a new car that you have the cash to pay for but don’t feel like forking out.
Pay your bills tied to your credit on time, don’t cosign loans for financially irresponsible people, and avoid taking out excessive loans and lines of credit. Do this, and you’ll always have excellent credit.
7. Not Living Paycheck-To-Paycheck
Are you still living paycheck-to-paycheck? If so, it’s time to stop. Do whatever you need to do so you’re not on the lookout for the next paycheck as soon you get paid.
Add a new source of income.
Decrease your expenses temporarily.
Downgrade your lifestyle.
Stop dining out.
Build an emergency fund.
8. (Bonus) How Much Money Do You Want To Have By X Age?
Too many people don’t have an answer to this question or know how much money they will need down the line. Determine those numbers today to know precisely how many dollars you need to invest. When you have clearly defined financial goals, you increase your odds of achieving them.
Once you know how much you want to have by x age, it’s time to execute your game plan. How much money will your budget require each month to reach your goals?
CONTRIBUTED BY Destiny S. Harris