December 17, 2008
As the economy has taken a downturn, businesses big and small are making changes to survive. To avoid your own economic downturn, now is a good time to take a serious look at your finances to prepare for tougher financial times ahead.
Evaluate Your Budget For A Tough Economy
Here are questions to ask as you give your family's finances a tune up. If you would like more help, feel free to contact Financial Center for a free financial review.
What do you need now?
Look at where you are spending your money right now. Use your Financial Center CheckCard (debit card) and online banking to track expenses for a few weeks and get a solid picture of where your money goes.
Where should your money be going?
As you review your spending, look objectively and classify expenses as needs or wants. You need to eat, but you don't necessarily need to have satellite or cable. When it comes time to cut back on expenses, evaluate your wants and cut from here first.
Are you prepared for a setback?
A good guideline is to try to keep your spending to less than 90% of your income in a normal economy. In this economy, even tighter limits may be warranted, at least until you have built up an emergency fund.
Evaluate your emergency fund and make sure it is large enough to see you through a potential job loss. Imagine if you had to cut back to bare expenses for 3-6 months. Where would you cut, and what is the minimum amount you need each month?
What should I do with any extra money?
The old adage of pay yourself first applies in a down economy. Setting aside enough to capitalize on any company 401(k) matches is a minimum.
How can I get out of the hole?
After you pay yourself, pay down any extra debt. Experts recommend starting with the smallest debt balances first. As you pay off smaller balances, add more to what you are paying on the next smallest debt and continue until you've paid everything off.
Financial Center can help you review your finances. Contact us today at 317.916.7700 or visit your nearest Center location.