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Evaluating Your FinancesIt’s a good idea to evaluate your finances periodically, especially if you’re planning a major purchase like a new car or home or if there are any significant changes in your income or expenses. Fortunately, most of the information you need is at your fingertips. When you assess your finances, follow these steps to ensure you’re making smart decisions that prepare you for the future.Create a Monthly BudgetAdd up your income.?To create a monthly budget, you should first determine how much income you have by listing your monthly income including salaries, interest, pension and any other sources, such as a spouse’s income. If you earn a salary, be sure to list your take-home pay rather than your gross pay. And if taxes aren’t automatically taken out of your paycheck, remember to include them as another expense.Estimate your expenses.?The best way to do this is to keep track of how much you spend in a month. To easily track your spending, check out the tools offered by your checking account, like downloading credit or debit card statements or scanning receipts with your smartphone. Divide your expenses into fixed costs (those that don’t change from month to month, such as rent and insurance payments) and flexible expenses (costs that change, such as food and entertainment). If some of your expenses change significantly each month, estimate the monthly expense with a three-month average of that category’s total.Figure out the difference.?Once you’ve totaled up your yearly income and expenses, subtract the expense total from the income total to get the difference. It’s a simple step that can reveal a lot about your spending habits. If the result is a positive number, congratulations – you’re spending less than you earn. If it’s negative, your expenses are greater than your income, and you will need to trim them in order to begin living within your means.Track it.?Creating a budget is just the first step. Keep track of your monthly income and expenses to make sure you’re sticking to your budget. It may take time to find the balance that works for you.Use our?Budget Worksheet?to get started on evaluating your personal finance situation.Print out and fill out this budget worksheet. more about?creating a budget.Build an Emergency FundAfter creating your budget, it’s important to protect the money you are saving for the future. Do you have funds set aside in case of a major unplanned expense? Building a substantial emergency fund that covers between three and six months’ worth of living expenses is key to a secure financial foundation. When reevaluating your finances, make sure to account for emergency fund savings so that you’re prepared to handle any unexpected costs. Think about ways you can divert money to your savings on a monthly basis to start building or growing an existing fund. Check out the?Emergency Fund calculator?to get started.Manage Debt LoadWhether you’re working on paying off a?mortgage?or?student debt, take time to evaluate how to most effectively pay down your loans.?Managing your debt load?— the sum total of all of your loans — will help you get a better handle on your financial health. Reducing these payments is an important step toward improving your financial well-being.Creating a BudgetIf you are like many Americans, you may find that you are spending more than you're saving and steadily going deeper into debt as a result. This is an easy and common pattern to fall into, and you’ll need some careful planning and discipline to reverse it.The first step is to create a budget by examining your income and expenses to determine exactly how much money you have coming in and how you’re spending it. Once you've got a clear understanding of your current budget, the challenge is to find places where you can spend less (or earn more) in order to achieve your financial goals. Use our?Budget Worksheet?and follow these steps:1. Question Your Needs and Wants?What do you want? What do you really need? Evaluate your current financial situation and make two lists — one for needs and one for wants. As you make the list, ask yourself the following:Why do I want it?How would things be different if I had it?Which things are important and essential to me?When your list is complete, reevaluate what qualifies as a need before making any purchases that will impact your budget.2. Set Guidelines?Keep your budget balanced with wants and needs by setting clear guidelines. If you splurge on a vacation, consider cutting other costs that month to offset that large expense. Take a look at this?Budget Worksheet?to get a sense of how to allocate your money for different expenses.3. Track, Trim and TargetOnce you start tracking, you may be surprised to find that you spend hundreds of dollars a month on eating out, entertainment or other discretionary expenses. To lower these costs, target areas where you can cut back on spending. Remember that reducing expenses is often a more realistic approach than cutting costs entirely.Budgeting BenchmarksCreating and sticking to a budget is key to building a strong financial foundation. It’s a smart habit that will help you throughout life — after all, many of your financial responsibilities will change over your lifetime. Whether you’re a student, parent, new employee or retiree, check out these tips for how to set and achieve financial goals at any stage of life.Tips for StudentsEstablishing strong budgeting habits is essential for students and recent graduates. Whether you’re paying off student loans, saving for a car, or getting ready to rent your first apartment, creating monthly goals can help you track progress and achieve milestones. As a student, it’s important to understand your unique set of financial priorities. For example, your parents may cover your housing costs or you might have to pay monthly rent. Similarly, your arrangement may offer a meal plan, or perhaps it’s your first time having to cook for yourself. Either way, budgeting can help prepare you to take on these new responsibilities.Learn more about?budgeting as a student.Planning as a New EmployeeJust landed your dream job but aren’t sure how to budget with a new salary? Entering the workforce or starting a new job presents a great opportunity to set goals and ensure the money you’re working hard for is being used wisely. Reevaluate your budget, taking into account any changes in income or monthly expenses. Consider areas where you might be able to lower expenses and increase saving, and take advantage of retirement savings options like 401(k)s and health benefit plans that your employer might offer. With 401(k) plans, you can save money toward your retirement on a tax-deferred basis so you don't pay federal or state income taxes on your savings until you withdraw the money at retirement.Learn about?employer benefits.Challenges for ParentsParenthood adds a lot of joy to life — and a lot of new expenses. The U.S. Department of Agriculture estimates that to raise a child born in 2013 to age 18, it costs an average of $245,000. Becoming a parent increases financial responsibility and can present personal finance challenges that did not exist before the addition of a new child. Create specific and realistic goals for a balanced and manageable budget for your family. Make sure to plan for a range of spending categories including emergency funds, education funds, housing payments and family vacations. As your family grows, there are bound to be new financial challenges at every stage of your children's lives, from day care to college. Learn how to adapt and readjust your budget throughout the year — with a bit of effort, it’ll more than pay off in the long run.Find out how to?create an emergency fund.Budgeting as a RetireeRetirement is likely to change your financial situation. Prepare ahead of time by exploring the different?retirement options?available to you, and remember that in doing so, you’re working toward securing your financial future. Budgeting for retirement comes years before your last day at work. Check your eligibility for programs like Social Security and Medicare and monitor any new laws involving government programs that may impact your savings. Many retirees opt to keep working in some part-time capacity to help offset expenses. Retirement is different for everyone, but planning for it years in advance is your best tactic for creating a financially stable environment.Read more about?retirement planning.Share ................
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